DEMAND

41

buy  a  thing,  considered  together.  It  is  compounded, ­
  of  course,  of  individual  demands
and  obeys  the  same  law.  The  lower  the
price  the  larger  will  be  the  amount  bought.
Those  who  purchased  before  will  purchase  more
because  of  the  law  of  diminishing  utility  ;  and
some  who  previously  found  the  price  too  high
for  them  will  be  enabled  to  buy  a  little.
In  the  study  of  many  economic  problems
it  will  be  found  that  the  so-called  elasticity  of
demand  is  an  exceedingly  fruitful  conception.
It  applies  both  to  individual  demand  and
compound  demand.  Demand  is  said  to  be
very  elastic  when  a  small  drop  in  price
causes  a  large  addition  to  the  amount  sold.
It  is  said  to  be  only  slightly  elastic  when  a
small  drop  in  price  means  a  small  addition
to  the  amount  sold.  Because  of  the  law  of
demand  formulated  above,  when  price  drops
sales  are  bound  to  be  augmented  to  some
extent.  In  order  to  enable  us  to  distinguish
unhesitatingly  between  a  comparatively  elastic
demand  and  a  comparatively  inelastic  one,
it  is  usual  to  adopt  a  conventional  definition
of  the  point  at  which  the  one  becomes  the
other.  This  point  plays  the  same  part  as
freezing  point  with  reference  to  temperature.
Degrees  of  heat  or  coldness  can  be  measured
with  reference  to  freezing  point.  So  degrees