Meaning: -Price elasticity of demand is generally known as elasticity of
demand. Elasticity of demand show how much expansion and contraction of demand
takes place due to fall or rise in price. Elasticity of demand is the
proportionate change in quantity demanded of a commodity as a result of
proportionate change in its price. In other words, Elasticity of demand is the
ratio of percentage change in quantity demanded of a commodity to the
percentage change in its price.
Symbolically,
Ed = %change
in quantity demanded
% change in price
The following are the different types of price elasticity of demand:
1.
Unitary Elastic
Demand: - When a change in price of commodity
brings about change in the demand of that commodity is exactly the same
proportion, it is called as unitary elastic demand. For instance, a 10% rise in
price of a commodity leads to a 10% fall in demand of that commodity.
Ed = %change in quantity demanded = 1
%
change in price
2. Relatively Elastic Demand: -When a
change in price of a commodity brings about more than proportionate change in the demand of that
commodity, it is called as relatively elastic demand. For instance, a 10% rise
in price of a commodity leads to 20% fall in demand of that commodity.
Ed = %change in quantity
demanded ≥ 1
% change in price
3. Relatively Inelastic Demand: -When a
change in price of a commodity brings about lessthan proportionate change in the demand of that
commodity, it is called as relatively inelastic demand. For instance, a 10%
rise in price of a commodity leads to 5% fall in demand of that commodity.
Ed = %change in quantity
demanded ≤ 1
% change in price
4. Perfectly(Infinite) in elastic demand: -When a slight change in the price of a commodity brings about an
infinite change in the demand of that commodity, it is called as Perfectly
elastic demand. For instance, a 10% rise in price of a commodity may lead to
infinite fall in demand of that commodity. The
perfectly elastic demand curve is parallel to X-axis.
Ed = %change in quantity
demanded = ∞
% change in price
5.
Perfectly Inelastic
demand: - When a change in price has noeffect on the quantity demanded of that commodity, it is called as
perfectly inelastic demand. For instance, a 10% rise in price will have
not effect on the quantity demanded. The quantity demanded remains the same
irrespective of rise or fall in price of that commodity.
Ed = %change in quantity
demanded = 0
% change in price
