Price elasticity of Demand
Elasticity – a relationship between
change in demand and change in price of a particular thing. How much change
takes place in demand when there is a change in price. How much change comes in
demand if there is a change in price? We analysis it and show in a ration or
percentage. For example, if we make a 2% price hike so how much percentage
change come in demand. It may be more than 2% or less than 2% or equal to 2%.
We have five different options for
this like: –
ü
Unit change – when there is a change in demand
is equal to change in price. We call it a unit changes. Change in y to y1 is
equal to x to x1.
 |
| unit change |
ü
Elasticity greater then unit – when there is a change in demand
is more than the change in price. Change in y to y1 is greater than x to x1.
 |
| Elasticity greater then unit |
ü
Elasticity less than unit – when there is a change in demand
is less than the change in price. Change in y to y1 is less than the change in
x to x1.
 |
| Elasticity less than unit |
ü
Zero elasticity – when there is no change in demand
at any change in price.
 |
| zero elasticity |
ü
Infinite elasticity – when there is a infinite change
in demand with a little or fewer or minor change in price.
 |
| Infinite elasticity |
