{"id":10850,"date":"2024-09-14T16:56:59","date_gmt":"2024-09-14T11:26:59","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=10850"},"modified":"2025-01-07T16:01:09","modified_gmt":"2025-01-07T10:31:09","slug":"types-of-price-elasticity-of-demand","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/types-of-price-elasticity-of-demand\/","title":{"rendered":"Types of Price Elasticity of Demand | Free Economic Blogs"},"content":{"rendered":"\n

Types of Price Elasticity of Demand<\/h2>\n\n\n\n
\"Types
Types of Price Elasticity of Demand<\/figcaption><\/figure>\n\n\n\n

Price Elasticity of Demand<\/h3>\n\n\n\n

According to Prof. Alfred Marshall, price elasticity of demand is a ratio of proportionate change in the quantity demanded of a commodity to a given proportionate change in its price.<\/p>\n\n\n\n

Ed = Percentage change in Quantity Demanded \/ Percentage change in Price<\/strong><\/p>\n\n\n\n

Symbolically,
Ed = %\u2206Q \/ %\u2206P ,
Ed = \u2206Q\/Q \u00f7 \u2206P\/P
Ed = \u2206Q\/Q \u00d7 P\/\u2206P
Where,
Q = Original quantity demanded
\u2206Q = Difference between the new quantity and original quantity demanded
P = Original price
\u2206P = Difference between new price and original price<\/p>\n\n\n\n

Following are the types of Price Elasticity of Demand:<\/strong><\/p>\n\n\n\n

1) Perfectly Elastic Demand (Ed = \u221e) :
<\/strong>When a slight or zero change in the price brings about an infinite change in the quantity demanded of that commodity, it is called perfectly elastic demand. It is only a theoretical concept. For example, a 10% fall in price may lead to an infinite rise in demand.<\/p>\n\n\n\n

Ed = Percentage change in Quantity Demanded \/ Percentage change in Price = \u221e
Ed = \u221e<\/p>\n\n\n

\n
\"Perfectly<\/figure>\n<\/div>\n\n\n

In the above figure, the demand curve DD is a horizontal line parallel to the X-axis indicating perfectly elastic demand.<\/p>\n\n\n\n

2) Perfectly inelastic demand (Ed = 0) :
<\/strong>When a percentage change in price has no effect on the quantity demanded of a commodity it is called perfectly inelastic demand. For example, a 20% fall in price will have no effect on the quantity demanded.<\/p>\n\n\n\n

Ed = %\u2206Q \/ %\u2206P
Ed = 0\/20 = 0
Ed = 0
In practice, such a situation rarely occurs. For example, demand for salt, and milk.<\/p>\n\n\n

\n
\"Perfectly<\/figure>\n<\/div>\n\n\n

In the above figure, when price rises from OP to OP1<\/sub> or when the price falls from OP to OP2<\/sub>, demand remains unchanged at OQ. Therefore, the demand curve is a vertical straight line parallel to the Y axis, indicating perfectly inelastic demand.<\/p>\n\n\n\n

3) Unitary elastic demand (Ed = 1) :
<\/strong>When a percentage change in price leads to a proportionate change in quantity demanded then demand is said to be unitary elastic. For example, 50% fall in price of a commodity leads to 50% rise in quantity demanded.<\/p>\n\n\n\n

Ed = %\u2206Q \/ %\u2206P
Ed = 50\/50 = 1
\u2234 Ed = 1<\/p>\n\n\n

\n
\"Unitary<\/figure>\n<\/div>\n\n\n

In the above figure, when price falls from OP to OP1<\/sub> (50%), demand rises from OQ to OQ1<\/sub> (50%). Therefore, the slope of the demand curve is a ‘rectangular hyperbola’.<\/p>\n\n\n\n

4) Relatively elastic demand (Ed >1) :
<\/strong>When a percentage change in price leads to more than proportionate change in quantity demanded, the demand is said to be relatively elastic. For example, 50% fall in price leads to 100% rise in quantity demanded.<\/p>\n\n\n\n

Ed = %Q \/ %P
Ed = 100\/50
\u2234Ed = 2
Ed > 1<\/p>\n\n\n

\n
\"Relatively<\/figure>\n<\/div>\n\n\n

In the above figure, when price falls from OP to OP1<\/sub> (50%), demand rises from OQ to OQ1<\/sub> (100%). Therefore, the demand curve has a flatter slope.<\/p>\n\n\n\n

5) Relatively inelastic demand (Ed < 1) :
<\/strong>When a percentage change in price leads to less than proportionate change in the quantity demanded, demand is said to be relatively inelastic. For example, 50% fall in price leads to 25% rise in quantity demanded.<\/p>\n\n\n\n

Ed = %\u2206Q \/ %\u2206P = 25\/50 = 0.5
Ed = 0.5
\u2234Ed < 1<\/p>\n\n\n

\n
\"Relatively<\/figure>\n<\/div>\n\n\n

In the above figure, when price falls from OP to OP1<\/sub> (50%), demand rises from OQ to OQ1<\/sub> (25%). Therefore, the demand curve has a steeper slop<\/p>\n\n\n\n