Advertisements
Advertisements
Question
Explain the different types of price elasticity of demand.
Solution
Degrees of Price Elasticity of Demand
- Perfectly Elastic Demand (Ed = α): 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 = α).
- 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 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.
APPEARS IN
RELATED QUESTIONS
Identify the type of goods having price elasticity of demand greater than 1:
Assertion (A): The recent war in Israel will impact key imports to India, which include rough cut and polished diamonds.
Reasoning (R): Diamonds are luxury goods having relatively elastic demand.
The demand curve is horizontal
What will be the value of price elasticity in this case?
If elasticity of demand for salt is zero, and household demands 2 kg. of salt during one month when its price is ₹ 5 per kg., this household will demand the same quantity of salt even if price rises to ₹ 8 per kg.
Would the elasticity of demand in the following case be unity, less than unity or greater than unity?
A rise in the price of a commodity reduces the total expenditure.
Would the elasticity of demand in the following case be unity, less than unity or greater than unity?
A rise in the price of a commodity increases total expenditure.
Draw a diagram showing the Elasticity of demand less than one.
Indicate the degree of elasticity of demand of the following demand curves.
Why is market demand curve more elastic than an individual demand curve?
What is the price elasticity of demand for the following demand curve:
Straight line demand curve parallel to Y-axis.
