TYPES OF PRICE ELASTICITY OF
DEMAND
Perfectly elastic demand: W here no
reductio n in price is needed to cause an increase in quantity demanded.
This is explained with the help of a diagram.
X axis-quantity
demanded
Y axis-
price
DD1-
demand curve
Explanation: Price elasticity of demand
is infinity when a small change in price leads to an infinitely large
change in the amount demanded It is perfctly elastic demand..[E=?]
ii. Perfectly
in elastic demand: Here a large change in price causes no change in
quantity demanded. It is zero elastic demand [E=0]. This is explained
with the help of a diagram.
X axis-quantity
demanded
Y axis-
price
DD1-
demand curve
Explanation: The figure shows that even
if the price decrease from p to p1 there is no change in the quantity
demand. This happens in case of necessities like salt.
Unitary elastic: Where a
given proportionate change in price causes an equally proportionate change
in quantity demand. This is explained with the help of a diagram.
X axis-quantity
demanded
Y axis-
price
DD1-
demand curve
Explanation: Price elasticity of demand
is unity when the change in demand is exactly proportionate to the
change in price. [E=1].
Relatively elastic: W here a
s mall change in price causes a more than proportionate change in quantity
demanded. The price elasticity o f demand is greater than u nity [E >1].
This is explained with the help of a d iagram.
X axis -quantity
demanded
Y axis -price
DD -demand
curve
Explanation: The figure sho ws that the
re is a small decrease in price fro m P to P1, but it has resulted in a
large increase in quantity demanded from Q to Q1. It is also known as
relatively elastic demand.
v. Relatively inelastic demand: W here a
change in price causes a less than proportionate change in quantity d
emanded. The price elasticity of demand is lesser than unity [E <1]. This is
explained with the help of a diagram.
X axis -quantity
demanded
Y axis -price
DD-
demand curve
Explanation: The figure shows that
there is a large decrease in price fro m P to P1, but it has resulted in
only a small increase in quantity demanded from Q to Q1. It is also known as
relatively elastic demand.
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