Perfectly Inelastic Demand
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Definition of Perfectly Inelastic Demand:
A perfectly inelastic demand
is a demand where the quantity demanded does not respond to price.
The implication of a perfectly inelastic demand is that price does not matter; the consumer would purchase the same amount of a good or service at every price. Life saving drugs are examples of goods with a nearly perfect inelastic demand, especially if there are no substitutes. For example, a diabetic must have a specific amount of insulin. Without insulin, the diabetic dies, but risks overdosing when more than necessary is taken. The quantity demanded of insulin would not be affected by a change in its price. This was more true when insulin was first developed. Insulin is more elastic now, because pharmaceutical companies have created substitutes and new treatments.
The demand curve for a perfectly inelastic demand would be vertical as shown on the graph below. Q1
would be purchased at every price.
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