The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the percentage change in price.
Eg. : If the price of Bread increase from Rs. 20 to Rs. 25 and the qty. demanded falls from 20 packets to 16 Packets then elasticity of demand will be.
Types of elasticity Based on quantum of Elasticity
Zero- no change( Perfectly inelastic)
Any price change will not effect the quantity demanded. Eg. Medicines
Greater than zero but less than one
Quantity Demanded will change with lesser percentage then Price movement
One ( unitary elastic)
Change in quantity demanded will be exactly equal to % change in price
Greater than one but less than infinity
Quantity demanded will change with higher percentage then price change
Infinity ( perfectly elastic)
Any price change will result in 0 demand
Types of elasticity Zero Elasticity (Perfect Inelastic Demand) Quantity 0 Price 5 4 Demand 100 1. An increase in price . . . 2. . . . leaves the quantity demanded unchanged.
Types of elasticity Elasticity (0-1) (Inelastic Demand) Quantity 0 Price 5 90 Demand 1. A 25% increase in price . . . 2. . . . leads to an 10% decrease in quantity demanded. 4 100
Types of elasticity Unit Elasticity (Elasticity Equals to “1”) Quantity 0 Price 2. . . . leads to a 25% decrease in quantity demanded. 4 100 5 75 1. A 25% increase in price . . . Demand
Types of elasticity Elasticity (>1) (Elastic Demand) Quantity 0 Price Demand 4 100 5 50 1. A 25% increase in price . . . 2. . . . leads to a 50% decrease in quantity demanded.
Types of elasticity Infinite Elasticity (Perfectly Elastic Demand) Quantity 0 Price 4 Demand 2. At exactly 4, consumers will buy any quantity. 1. At any price above 4, quantity demanded is zero. 3. At a price below 4, quantity demanded is infinite.