Elasticity of demand

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Elasticity of demand

We know that according to the law of demand if the price falls demand expands and vice verse. 
Here the law of demand tells us the changes in quantity demanded in response to change in price, but it does not tell us the extent of changes in quantity demanded or that how much change has been occurred. 
To know the extent of changes in quantity demanded, the economist used the concept of elasticity of demand.

The elasticity of demand is used to measure the effect of changes in price on quantity demanded or the rate of change in demanded in response to change in price. 

According to economic theory, every commodity does not have same elasticity. Some commodities are more elastic and some less elastic.  The economist, therefore, group various degree of elasticity of demand or measurement of elasticity of demand.


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i.                 Perfectly inelastic demand
ii.               Infinitely elastic demand
iii.             Unitary elastic demand
iv.             Relatively elastic demand
v.               Relatively inelastic demand.
i)               Perfectly inelastic demand: When the quantity demand does not change at all to whatever change in price, the demand is said to be perfectly inelastic or elasticity of demand for that product is zero.
ii)     Infinitely elastic demand: The demand is perfectly elastic when the amount demanded at the prevailing price is infinite. In case of infinite elastic demand, the buyers with a very small decrease in price, increase their purchase to an infinite amount and with a slightly higher price, the quantity demanded drop to zero.
iii)           Unitary elastic of demand: When the quantity demanded changes by exactly the same percentage price, the demanded that good is said to be unitary elastic demand. e.g. 30% change in price leads to be 30% change in quantity demanded.
iv)      Relatively elastic demand: If a percentage change in price generates a larger percentage in quantity demanded of a product, the demand is said to be relatively elastic. We can say that the elasticity of demand is greater than one e.g. if price changes by 10% and It brings 20% changes in quantity demanded.
v)    Relatively inelastic demand: When the percentage change in price generates a smaller percentage change in quantity demanded of a product, the demand is said to be relatively inelastic demand. The elasticity here less than one or less than unity. e.g. 30% change in price leads to 10% change in quantity demanded. 

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Naeem Javid Muhammad Hassani

NJMH is working as Deputy Conservator of Forests in Balochistan Forest & Wildlife Department (BFWD). He is the CEO of Tech Urdu (techurdu.net) Forestrypedia (forestrypedia.com), Majestic Pakistan (majesticpakistan.pk), All Pak Notifications (allpaknotifications.com), Essayspedia, etc & their YouTube Channels). He is an Environmentalist, Blogger, YouTuber, Developer & Vlogger.

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