CFA Study Guide

Economics: Elastic & Inelastic Curves

There are theoretically perfect versions of both of these curves as, where the Elastic curve is perfectly horizontal and the Inelastic curve is perfectly vertical.

So if you remember much from calculus you might know that perfect curves on charts like this either have a value of ∞ or 0. The easiest way to remember this point is to think of elasticity in a very literal sense. Imagine a rubber band. If it were very elastic it could stretch from here to the other end of the earth, if it were Inelastic, you couldn’t stretch it at all, hence ∞ and 0.

Perfectly Elastic curve = ∞
Perfectly INelastic curve = 0