Hammer and anvil svg11/7/2023 Ordinally, the price elasticity of demand for necessity goods like salt, sugar, matchboxes etc. The price elasticity of demand varies with the nature of the commodities. Factors affecting Price Elasticity of Demand: 1)Nature of Commodity : Therefore, it shows a relatively inelastic demand. Here, the change in price is more than the change in quantity demanded. As the price increases to P 1, the quantity demanded falls to Q 1 units. At the price P, the quantity demanded is Q units. In fig, the X-axis shows the quantity demanded and the Y-axis shows the price. It implies a relatively inelastic demand. As the price increases to Rs 15, the quantity demanded declines to 15 units. Suppose, the price of a commodity is Rs 10 and the quantity demanded is 20 units. It means that the greater change in price leads to a smaller change in demand. The demand can be said as relatively inelastic when a proportionate change in quantity demanded is less than proportionate change in price. Therefore, it can be said as perfectly elastic demand. Here, the change in price is less than the change in quantity demanded. As the price is increased to P 1, the quantity demanded is decreased to Q 1 units. As the price declines to Rs 30, its demand increases to 30 units. 40 and the quantity demanded is 20 units. It is also known as highly elastic demand and more than unitary elastic demand. It means that there will be a greater change in demand due to a small change in price. Relatively elastic demand occurs when a proportionate change in demand is greater than the proportionate change in price. It implies that the demand is unitary elastic. As the price increases to P 1, the quantity demanded decreases to Q 1 by an equal proportion. 50 and the quantity demanded in a specific market is 200 units. It is an imaginary concept as rarely found in the practical world. The demand can be said as unitary elastic when the percentage change in quantity demanded is equal to the percentage change in price. This implies that the demand is perfectly inelastic. It remains constant at the initial quantity Q. As the price increases to P 1, there is no effect on the quantity demanded. In fig, the x-axis shows the quantity demanded and the y-axis shows the price. It implies the demand is perfectly inelastic. As the price increases to Rs 20, the demand remains constant at 200 units. Suppose the price of a bottle of water is Rs. It is represented by a straight line parallel to the vertical axis. Hence, It is rarely found in real but the closest example we can take is water and other necessity goods. It implies that the demand remains constant for any value of the price. When demand doesn’t change with change in price( whether rising or fall), then demand is said to be perfectly inelastic. When the price is slightly decreased, it leads to an increase in demand by a large amount i.e. The initial demand at price P is Q units. As the price falls to Rs 9, its demand increases to infinity. Suppose the price of a commodity is rs 10 and its demand is 50 units. This can be shown by a straight-line demand curve parallel to the horizontal axis. It is a theoretical concept only as it has no importance in the practical world. Therefore, It is also known as infinite elasticity. The demand is said to be perfectly elastic when a small rise in price would result in a fall in demand to zero, while a small fall in price results in demand to become infinite. Types or Degrees of price elasticity of demand: Unimax Publications Book’s Solution – PSEB.Usha Publication Book’s Solution – PSEB.You can copy, modify, distribute and perform the work, even for commercial purposes, all without asking permission. The person who associated a work with this deed has dedicated the work to the public domain by waiving all of their rights to the work worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law. This file is made available under the Creative Commons CC0 1.0 Universal Public Domain Dedication. To the uploader: Please provide as parameter the link to the page where this image appears.
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