welcome back and so as promised we're not going to talk about the polar cases of elasticity polar meaning the extreme ends like the north pole and south pole or the poles on magnets we're talking about the extremes so one thing i want to say before we go into these is often in economics we talk about hypothetical extremes typically when it's one of these hypothetical extreme cases you see the term perfectly so perfectly elastic demand is going to be a hypothetical case where demand is as elastic as possible it probably doesn't exist in the real world but by looking at perfectly elastic demand it allows us to have a better understanding of real demands and real elasticities okay so that's why we do it so elastic means the percentage change in quantity is larger than change in price the extreme example of this is perfectly elastic when prices are set and any changes means no supply or and we're talking about demand here no demand that's perfectly elastic demand any change the price means you lose all of your demand so an example i like to give is if you've ever been to las vegas a lot of times you'll see a bunch of people selling water bottles outside of casinos at least i've seen that so imagine on one of those bridges between two casinos you got three people selling water bottles okay so person a person b person c they're all selling water balls they're all selling some person they're selling 10 20 person b song 15 or 20 person c selling his 10 or 20 and they're all charging a buck for a water bottle and then person c says i'm smarter than these guys i'm not gonna charge a dollar i'm gonna charge two dollars and get more money what happens to their sales remember there are two other people selling water balls identical water bottles 10 feet away from this guy no no one's going to buy from person c he's going to sell zero none okay because his demand is going to vanish when he raises the price even if he tries to sell it for a dollar and one cent who's gonna buy a water bottle for a dollar and one cent when someone 10 feet away is going to sell it for a dollar okay probably nobody and again that's a hypothetical extreme but that's kind of what we mean by perfectly elastic demand is if you try to raise your price even by a penny you lose all of your sales quantity demand goes to zero okay so while this might be unrealistic some goods might have extremely high elasticity and this the the best example of this is things with really really really close substitutes where people are indifferent like you have two pencils next to each other for sale on a table and they're both just pencils maybe they are different brands technically but i can't tell the difference they're just pencils and and you raise the price of one of them people are probably just going to buy the other one okay so what does the demand curve look like for that it looks like a horizontal line okay it looks like a horizontal line because you uh at any the demand is set so at this price you're going to sell stuff however much you sell depends on the supply but if you change your price even a little bit your demand goes away so there is no demand curve at any other price that's why we draw as horizontal so what does the elasticity of demand look like in this case and i know i say it up here but if this is the percentage change in quantity this is the percent change in price if the percentage change in price is even a tiny change that's supposed to be a tiny little arrow up you have a huge change in the percent change in quantity so in math when you have a giant number divided by an infinitely small number we say this approaches infinity so we wouldn't it is sort of a misnomer to say equals infinity but it approaches infinity we have no upper limit and perfectly elastic means the it's infinite okay okay next perfectly inelastic demand and again this is a hypothetical extreme but what this just means is that sorry i was reading the top part that's inelastic perfectly elastic which means even a huge change in the price has no impact on quantity so now and again think about the percentage change in price over the percent change in quantity oh sorry quantity goes on top so no matter how big this number is up down here there's no change to quantity that number is equal to zero so we have zero over a big number equals zero so perfectly inelastic demand is demand that equals zero so this is unrealistic again but you could get really close to perfectly inelastic demand you have something like a life-saving medication that you must take this medication no matter what or you will die then the demands can be close to perfectly inelastic charge me one dollar bill a pill i buy it ten dollars a pill i buy it a hundred dollars a pill i buy a thousand dollars a pill i buy it the reason we wouldn't say it's actually perfectly inelastic because remember demand is based on not just your desire but also your ability to purchase something so charge me a million dollars a pill i guess i'm dead and so we wouldn't say it's you know perfectly elastic because it could be perfectly inelastic over the relevant range of prices remember from my last um lecture because if the price goes from a dollar to maybe 100 maybe you don't change anything in that case between one and a hundred it is perfectly inelastic but if we go all the way to the end to the extreme values it could not be perfectly elastic anymore excuse me and the graph for a perfectly inelastic demand curve is a straight line that's vertical why because no matter what the price is the quantity stays the same okay those are the polar cases the elasticity um i'm still going to segment this in a couple more videos because we have a clean break here i know we're going to end up with a lot of videos for this chapter but uh yeah we're going to stop here