Share Your Word File Perfectly Elastic Demand (Ep = ∞): The demand is said to be perfectly elastic when a slight change in the price of a commodity causes a major change in its quantity demanded. Price elasticity of demand is the degree of responsiveness of quantity demanded of a good to a change in its price. The elasticity of demand measures the relative change in the total amount of goods or services that are demanded by the market or by an individual. The elasticity of demand is said to be zero. 1. The degree of elasticity of demand helps in defining the shape and slope of a demand curve. The quantity demanded depends on several factors. The amount demanded is totally unresponsive of change in price. The advertisement elasticity is positive. The price elasticity of demand is generally different at different points of the demand curve. The quantity demanded will not change despite changes in the price. We compare the percentage change in the demand quantity of a product against the percentage change in the alternative product price to calculate this. There are different types of price elasticity of demand i.e. Here the slope of the demand curve which is the denominator in the Samuelson-Holt formula is constant by definition. One point to note is that unless otherwise mentioned, whenever the elasticity of demand is mentioned, it implies price elasticity. For better understanding the concepts of elastic and inelastic demand, the price elasticity of demand has been divided into five types, which are shown in Figure-1: Let us discuss the different types of price elasticity of demand (as shown in Figure-1). The concept of elasticity of demand measures the rate of change in demand. For example, if the price is the source of the change, we have the “price elasticity of demand”. So, we have several types of elasticity of demand according to the source of the change in the demand. Relatively elastic demand refers to the demand when the proportionate change produced in demand is greater than the proportionate change in price of a product. TYPES OF ELASTICITY OF DEMAND • 1) PRICE ELASTICITY OF DEMAND • 2) CROSS ELASTICITY OF DEMAND • 3) INCOME ELASTICITY OF DEMAND • 4) ADVERTISING OR PROMOTIONAL ELASTICITY OF DEMAND 2. The following are the different types of price elasticity of demand: Perfectly inelastic demand Demand is said to be perfectly inelastic when the quantity demanded is independent of the price of the good. This refers to the change or sensitivity in the customer’s demand for the quantity of a good with respect to a change in its price. Flatter the slope of the demand curve, higher the elasticity of demand. According to the source of the change, the following types of elasticity of demand can be mentioned: According to the degree of the change in the demand, the elasticity can be classified in: The price elasticity of demand is the proportional change in the quantity demanded, relative to the proportional change in the price of the good. There are four types of elasticity, each one measuring the relationship between two significant economic variables. Content Guidelines 2. Relatively inelastic demand is one when the percentage change produced in demand is less than the percentage change in the price of a product. In perfectly elastic demand, a small rise in price results in fall in demand to zero, while a small fall in price causes increase in demand to infinity. 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