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Relatively elastic:

In this case a slight change in price leads to more than proportionate change in quantity demanded. This can be represented by a gradually sloping demand curve (it will be flatter). The numerical co-efficient of relatively elastic demand is > 1. In this case the demand curve would be flatter or wider. This holds good in case of luxuries.

 

Example
Price (₹) Quantity Demanded
10 100
15 20
 
= ∆Q/ ∆P x P/Q
= 80/ 5 x 10/100 = 1.6
So, 1.6 > 1
 
Description: 18178.png
 

 

Note: 5% change in price brings 8% change in quantity.


Relatively inelastic: In this case, a large change in price leads to less proportionate change in demand. This can be represented by a steeply sloping demand curve. The numerical co-efficient of relatively inelastic demand is <1. This condition holds good in case of necessaries.
 

Price (₹)

Quantity Demanded

10

100

4

150

 
= ∆Q/ ∆P x P/Q
= 50/ 5 x 10/100
= 0.5
So, Ep = 0.5 < 1
 
Description: 18243.png
 
Original price was OP, Quantity purchased at that price was OQ.
 
New price is OP1 and new quantity purchased is OQ1.
 
Price has decreased by 6% but demand has increased by 3%.

 

Note: 6% change in price brings 3% change in quantity.

Unitary elasticc:

Any change in price brings about an equally proportionate change in the quantity demanded. The numerical co-efficient of unitary elastic demand is always 1. (Ep = 1). In this case the demand curve would be rectangular hyperbola.
 

Price (₹)

Quantity Demanded

10

100

5

150

 
= ∆Q/ ∆P x P/Q
= 50/ 5 x 10/100
= 1
So, Ep = 1
 
Original price was OP, Quantity purchased at that price was OQ.
 
New price is OP1 and new quantity purchased is OQ1.
 
Price has decreased by 5% but demand has increased by 5%.
 
Description: 18318.png

 

Note: 5% change in price brings 5% change in quantity.

Perfectly inelastic

In this case, whatever may be the change in price quantity demanded will remain perfectly constant. The demand curve is a vertical straight line and is parallel to OY axis. The numerical co-efficient of perfectly inelastic demand is O (zero).
 

Price (₹)

Quantity Demanded

10

100

5

100

 

Description: 18393.png

 
= ∆Q/ ∆P x P/Q
= 0/ 5 x 10/100
So, Ep = 0
 
Original price was OP, Quantity purchased at that price was OQ.
 
New price is OP1 and new quantity purchased is still OQ.
 
When the price still increases to OP2 and quantity purchased is still OQ only. Then the demand is said to be perfectly inelastic.
 
Example - 5% change in price brings no change in quantity. This is generally in case necessary goods like water, electricity, medicine, etc.

Perfectly elastic:

In this case, a very small change in price leads to infinite change in demand. The demand curve is a horizontal curve and is parallel to OX axis, the numerical co-efficient of perfectly elastic demand is ∞.
 
Description: 18406.png
 
In nutshell,
 

Numerical measure of elasticity

Verbal description

Terminology

Zero

Quantity demanded does not change as price changes

Perfectly (or completely) inelastic

Greater than zero, but less than one

Quantity demanded changes by a smaller percentage than does price

Inelastic

One

Quantity demanded changes by exactly the same percentage than does price

Unit elasticity

Greater than one, but less than infinity

Quantity demanded changes by a larger percentage than does price

Elastic

Infinity

Purchases are prepared to buy all they can obtain at some price and none at all at an even slightly higher price

Perfectly (or infinitely) elastic





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