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NATURAL MONOPOLY: A special type of monopoly that's able to lower its price when it produces and sells a larger quantity. This somewhat remarkable ability results because a natural monopoly uses a great deal of capital. In that capital carries an up front cost that must be paid regardless of production, a natural monopoly can spread these costs over larger quantity--if it produces more. The larger the quantity sold, the lower the cost for each unit. A single natural monopoly is thus able to produce and supply a good at a lower cost, and price, than two or more firms. In other words, if two or more firms try to supply the same good, the market will "naturally" end up with just one.
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                           INELASTIC DEMAND: The general elasticity relation in which relatively large changes in price cause relatively small changes in quantity demanded. Large changes in price cause relatively small changes in quantity demanded or the percentage change in quantity demanded is smaller than the percentage change in price. This characterization of elasticity is most important for the price elasticity of demand. Inelastic demand is one of two general elasticity relations for demand. The other is elastic demand. An inelastic demand relation is NOT a very responsive, or stretchable, relation. The inelastic demand relation is most often directed toward demand in terms of the price elasticity of demand. In this context, demand is said to be inelastic if the percentage change in quantity is smaller than the percentage change in price. This means that buyers are not responsive to price changes.An inelastic demand relation can fall into one of two categories--perfectly inelastic and relatively inelastic. - Perfectly Inelastic: Perfectly inelastic means that quantity demanded is unaffected by any change in price. In other words, the quantity is essentially fixed. It does not matter how much price changes, quantity does not budge. Perfectly inelastic demand occurs when buyers have no choice in the consumption of a good.
- Relatively Inelastic: Relatively inelastic means that relatively large changes in price cause relatively small changes in quantity. In other words, quantity is not very responsive to price, but it does change. More specifically, the percentage change in quantity demanded is less than the percentage change in price. Relatively inelastic demand occurs when buyers are only able to choose among a small number of imperfect substitutes-in-consumption.
Recommended Citation:INELASTIC DEMAND, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: March 30, 2023].
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