2. For the following goods, what is the elasticity of demand? Explain. What is the shape of the demand curve?
Demand for a blood transfusion by an accident victim
The demand of an accident victim for a blood transfusion is very likely to be perfectly inelastic because there is no substitute and it is necessary for survival. The demand curve will be vertical, at a quantity equal to the needed transfusion quantity.
Demand by students for green erasers
Students’ demand for green erasers is likely to be perfectly elastic because there are easily available substitutes: nongreen erasers. The demand curve will be horizontal, at a price equal to that of nongreen erasers.
Solutions appear at back of book.