In a true emergency, a patient is unlikely to question the price of the ambulance ride to the hospital. But even in a nonemergency, like Kira’s broken teeth, patients are often unlikely to respond to an increase in the price of an ambulance by reducing their demand because they are unaware of the cost. As a result, investors in private ambulance companies see profit-making opportunities in delivering ambulance services, because the price elasticity of demand is small. But what does that mean? How low does a price elasticity have to be for us to classify it as low? How big does it have to be for us to consider it high? And what determines whether the price elasticity of demand is high or low anyway?

To answer these questions, we need to look more deeply at the price elasticity of demand.