Question

Explain the degrees (types) of price elasticity of demand.

Answer 1

Degrees (types) of price elasticity of demand:

• The extent of change in demand because of a change in price can be expressed in five degrees. This is known as degrees of price elasticity of demand.
• Demands are not fix and possess elasticity.
• All commodities do not have same price elasticity. It varies from one good to another.
• The price elasticity of demand ranges from 0 (zero) to ∞ (infinity).
• Price elasticity can be 0, <1, = 1, >1 and infinity.

Based upon these five situations, their are five degrees of demand. They are:

1. Perfectly elastic demand (ε_p = ∞)
2. Perfectly inelastic demand (ε_p = 0)
3. Unitary elastic demand (ε_p – 1)
4. Relatively elastic demand (ε_p > 1)
5. Relatively inelastic demand (ε_p < 1)