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Question
Explain the different types of price elasticity of demand.
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Solution
Degrees of Price Elasticity of Demand
- Perfectly Elastic Demand (Ed = ∞): 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 (Ed = ∞)
- Perfectly Inelastic Demand (Ed = 0): When demand remains constant and does not change with change in price, the demand is known as perfectly inelastic.
- Highly Elastic Demand (Ed > 1): When % change in quantity demanded > % change in price, it is called highly elastic demand.
- Inelastic Demand (Ed < 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.
- Unit Elastic Demand (Ed = 1): When percentage change in demand for a commodity is equal to percentage change in price, it is termed as unit elastic demand.
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