[MUSIC] I'd like to take a moment just to warn you that along a straight line demand curve, elasticity is not constant. We know that along a straight line the slope is constant. But slope and elasticity are not the same concept. Let's go back to the definition of elasticity. Percentage change in quantity over percentage change in price. We can approximate the percentage change in quantity as the change in quantity over quantity. And we can approximate the percentage change in price as the change in price over price. Rearranging this, we get that elasticity is equal to the change in quantity over the change in price times price over quantity. Now of course this first term is the slope, or it's actually one over the slope. So this term is constant. But this term changes as we go down the demand curve. As we go down the demand curve, the price drops and the quantity increases. So along the demand curve, elasticity changes. And specifically in the top region demand is elastic with a elasticity of demand greater than one and down towards the bottom demand is inelastic with an elasticity of demand less than one. Let's think through a quick, numerical example to convince us that that's the case. Suppose we're talking about the mango market or the market for mangos. And suppose that at a price of $8, one person wants to buy one pound of mango's. And suppose the price drops to $7 per pound and now two pounds are being in the market. A relatively small change in terms of price. A change about 10% has doubled the quantity of mango's from one to two. So again, a relatively small change in price, brought us a big responsiveness in terms of quantity. Which means elasticity of demand is greater than one. If we go to the bottom of the demand curve and we do this again, we can think about what happens when the price drops from one $2 to one dollar. In terms of the change in quantity, in terms of the slope, we should have the same effect. So for example, quantity demanded might increase from nine to ten, but what does this mean in terms of percent change? The percent change in price here is about 50%. Right? It's a 50% drop in price, and the change in quantity is only about 10%. So here a big change in price in terms of percentage points caused only a small change in quantity in terms of percentage terms, which is why elasticity of demand is less than one. So again, along a straight line demand curve, slope is constant, but not elasticity, as we go down in this direction, elasticity drops. The top part is elastic, the bottom part is inelastic. Somewhere in the midpoint, there's elasticity equal to one, and let's try and remember that.