Explain the types of price elasticity of demand .
What are the tyoes of price elasticity of Demand?
The price elasticity of demand of a commodity refers to the responsiveness of demand to change in the price of the commodity. The following are the different types of price elasticity of demand:
Perfectly inelastic demand
Demand is said to be perfectly inelastic when the quantity demanded is independent of the price of the good. In other words, the quantity demanded does not show any responsiveness to the change in the price. Thus, an elasticity of demand is perfectly inelastic i.e. |Ed| = 0. This can be represented as follows:
Unitary elastic demand
When the demand for a good responds exactly in the same amount as the change in its price, the demand is said to be unitary elastic. In this case, the percentage change in the demand for a good is equal to the percentage change in its price and |ed| =1.
Perfectly elastic demand
The demand is said to be perfectly elastic when the price is independent of the quantity demanded. In other words, a slight change in the price can lead to a very high change in the quantity demanded. Thus, the elasticity of demand is perfectly elastic i.e. |Ed| = ∞.
Relatively elastic demand
The demand is said to be relatively elastic if it is highly responsive to its price. In this case, the percentage change in demand is greater than the percentage change in the price. Here, |ed| > 1
Relatively inelastic demand
The demand for a commodity is said to be relatively inelastic when the change in price leads to a proportionately less change in the quantity demanded. Here, |ed| < 1.
The elasticity of demand is less than one i.e. |Ed| < 1.
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