Elasticity of Demand / Types of Elasticity of Demand

Elasticity of Demand

Elasticity of Demand

This concept explains the proportional change in the amount demanded of a good as a result of change in its price, income of the consumer and the price of other related goods. Elasticity of demand is defined as the responsiveness of the quantity demanded of a good to change in one of the variable eon which demand depends. In other words, it is the percentage change in the quantity demanded divided by the percentage of one of the variables on which demand depends.

Types of Elasticity of Demand

There are five types of elasticity of Demand:

a. Perfectly Elastic Demand

When the demand becomes zero with a slighr rise in the price of a commodity

or when the demand is infinitive at a given price, it is said to be perfectly elastic

demand.

                                                               ED = ∞

 b. Elastic Demand

When the proportionate (or percentage) change in the quantity demanded is

greater than the proportionate (or percentage) change in price, it is said to be

elastic or relatively elastic demand.

c. Unit Elastic Demand

When the proportionate (or percentage) change in the quantity demanded is

equal to the proportionate (or percentage) change in price, it is said to be unit

elastic demand.

d. Inelastic Demand

When the proportionate (or percentage) change in the quantity demanded is less than the proportionate (or percentage) change in price, it is said to be inelastic demand.

e. Perfectly Inelastic Demand

When there is no change in the quantity demanded with the change in its prices, it is perfectly inelastic demand.