Price Elasticity of Demand

5. Relatively Inelastic Demand

When proportionate change in quantity demanded is less
than a proportionate change in price.

D
Price

P2
P1
Ep < 1

D
Q1 Q2 Quantity
 Unit II

Elasticity of Demand

A.Latha .,MBA., M.Phil G2 & G5 September 2014 Batch

 Elasticity of Demand

Elasticity of Demand measures the

degree of responsiveness of the quantity
demanded of a commodity to a given
change in any of the determinants of the
demand

3
 Price Elasticity of Demand

Price elasticity of Demand Measures the

proportionate change in quantity
demanded of a commodity to a given
change in its price

4
 Degrees of Price Elasticity

1. Perfectly Elastic Demand

2. Highly Elastic Demand
3. Unitary Elastic Demand
4. Relatively Inelastic Demand
5. Perfectly Inelastic Demand

5
 Perfectly Elastic Demand

Unlimited quantities of the commodity

can be demanded at the prevailing price
& even a negligible increase in price
would result in Zero quantity demanded

Foreign Currency
Exchange

6
 Highly Elastic Demand

When proportionate change in quantity

demanded is more that a given change in
price , the commodity is regarded to
have a highly elastic demand
Price

D Cost of Luxury Goods

Car , Gold
P2
P1
D Ep > 1

Q1 Q2 Quantity
MBA2012, September 2013
Price

P2
P1
Ep = 1
D

Q1 Q2 Quantity
Price

D
SALT
P2
P1
Ep = 0

D
Q1 Q2 Quantity
 Relatively Inelastic Demand

When proportionate change in quantity demanded is less

than a proportionate change in price.

D
Price

P2
P1
Ep < 1

D
Q1 Q2 Quantity