Elastic: elastic
demand is where PED is greater than 1. Elastic demand signifies that for a
small change in price there will be more than proportionate change in quantity
demanded. [Price sensitive products] An elastic demand curve will be more
horizontal and flat in shape and more steeper to the quantity demanded side.
Inelastic: inelastic
demand is where PED is less than 1. Inelastic demand refers that a large change
in price causes only a small change in quantity demanded. [Price insensitive
products]. An inelastic demand curve is more vertical and steeper to the price
line. The following diagram shows an inelastic demand curve.
Imaginary situations of Price Elasticity of demand
Other
than Elastic and Inelastic demand there are Imaginary or
Exceptional situation – They are practically impossible and only Theoretical
Situations and they are as follows.
Unit elastic: Unit elastic
is where the PED is equal to one. [= 1] When PED is unit elastic, change in
quantity demanded will be equal to change in price.
Perfectly elastic: Perfectly
elastic demand is where price elasticity of demand is equal to infinity [Any
number/Zero=infinity]. When the
PED is perfectly elastic, the buyers will buy at the current market price, but
if the price is increased no one will buy that good, therefore the quantity
demanded will fall to zero. The curve for perfectly elastic demand curve will
be fully horizontal. It is shown by the below diagram.
Perfectly inelastic: Perfectly
inelastic demand is where PED is equal to zero [Zero/any number = 0]. Any
change in price will have no impact on the quantity demanded.
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