Understanding Degrees of Elasticity of Demand
Elasticity of demand refers to the responsiveness of quantity demanded to changes in price. Perfectly elastic demand occurs when there is an infinite demand at a particular price and demand becomes zero with a slight rise in price. Conversely, perfectly inelastic demand occurs when there is no change in demand with a change in price. Highly elastic demand indicates that the percentage change in quantity demanded is more than the percentage change in price, while less elastic demand means the opposite. Unitary elastic demand occurs when the percentage change in quantity demanded is equal to the change in price.
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Presentation Transcript
DEGREES OF ELASTICITY OF DEMAND
PERFECTLY ELASTIC DEMAND WHEN THERE IS AN INFINITE DEMAND AT A PARTICULAR PRICE AND DEMAND BECOMES ZERO WITH A SLIGHT RISE IN THE PRICE,THEN DEMAND FOR SUCH A COMMODITY IS SAID TO BE PERFECTLY ELASTIC
PERFECTLY INELASTIC DEMAND WHEN THERE IS NO CHANGE IN DEMAND WITH CHANGE IN PRICE,THEN DEMAND FOR SUCH A COMMODITY IS SAID TO BE PERFECTLY INELASTIC
HIGHLY ELASTIC DEMAND WHEN PERCENTAGE CHANGE IN THE QUANTITY DEMANDED IS MORE THAN PERCENTAGE CHANGE IN PRICE,THEN DEMAND FOR SUCH A COMMODITY IS SAID TO BE HIGHLY ELASTIC
LESS ELASTIC DEMAND WHEN PERCENTAGE CHANGE IN THE QUANTITY DEMANDED IS LESS THAN PERCENTAGE CHANGE IN PRICE,THEN DEMAND FOR SUCH COMMODITY IS SAID TO BE LESS ELASTIC OR INELASTIC
UNITARY ELASTIC DEMAND WHEN PERCENTAGE CHANGE IN THE QUANTITY DEMANDED IS EQUAL TO CHANGE IN PRICE,THEN DEMAND FOR SUCH A COMMODITY IS SAID TO BE UNITARY ELASTIC
