Fig 2. Impact of an inelastic and elastic demand curve on equilibrium market price and quantity.
The impact of an inelastic and elastic demand curve on equilibrium market price and quantity associated with a reduction in milk production following an outbreak of Johne’s disease. The inelastic, DIn, and elastic, DEl, demand curve determine the responsiveness of consumers to new equilibrium market price, P1. A more inelastic demand curve, DIn, (i.e. the demand curve is steeper in shape) reflects a larger loss in economic welfare, represented by shaded area, relative to a relatively more elastic demand curve, DEln, represented by area.