Question

Explain the different types of price elasticity of demand.

Answer 1

Degrees of Price Elasticity of Demand

1. Perfectly Elastic Demand (E_d = ∞): When the demand for a commodity rises or falls at a particular price or becomes zero with a slight rise in price, the demand for that commodity is said to be perfectly elastic (E_d = ∞)
2. Perfectly Inelastic Demand (E_d = 0): When demand remains constant and does not change with change in price, the demand is known as perfectly inelastic.
3. Highly Elastic Demand (E_d > 1): When % change in quantity demanded > % change in price, it is called highly elastic demand.
4. Inelastic Demand (E_d < 1): When the percentage change in quantity demanded for a commodity is less than the percentage change in its price, it is called highly inelastic demand.
5. Unit Elastic Demand (E_d = 1): When percentage change in demand for a commodity is equal to percentage change in price, it is termed as unit elastic demand.