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The price elasticity also depends on which type of good we study. Most importantly, one distinguishes between cases where the price elasticity is less than -1 or between -1 and 0. If it is less than -1 that means that the quantity decreases more (in percent) than the price increases (again, in percent), which is called elastic demand. If it is between -1 and 0 it means that the quantity decreases less than the price increases, which is called inelastic demand. 4 has elastic demand at point A but inelastic at point B.

In such a point, the curve has no defined slope (since it has different slopes to the left and to the right) and, hence, MRS does not exist. Use the following strategy to find the point of utility maximization: x Draw the budget line. e. an indifference curve that the budget line is a tangent to). In most cases, there is only one such indifference curve. All other indifference curves either crosses the budget line or does not touch it at all. Be careful, however, to check if there exists a corner solution.

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