Price Elasticity

Price elasticity may be defined as degree of responsiveness of the quantity demanded of a commodity to the change
in the price of commodity. In other word it is the ratio of the percentage change in quantity demanded to the
percentage changed in price ( )

Types of elasticity of demand

1. Elastic demand: Demand is said to be elastic if small change in price leads to a greater change in the quantity
of goods demanded. In this case, elasticity is greater than one or unitary, I.e. . This type
elasticity can also be described as fairly elastic demand
D
𝐸 𝑖𝑛𝑓𝑖𝑛𝑖𝑡𝑦

P2
Price
P1

0
QI Q2
Quantity demanded
Elastic or fairly elastic demand

2. Inelastic demand: demand is said to be in elastic if a larger change in price leads to a small or slight change in
the quantity of goods demanded. In this cases elasticity is less than one but greater than zero, i.e.
said to the unitary when a
change in price

D
𝐸

P2
Price
P1

QI Q2
Quantity demanded

Inelastic demand or fairly inelastic demand

3. Unity of unitary elastic demand: Demand is said to be unitary when a change in price leads to an equal change
in the quantity of goods demanded. In other words, a 5% change in price will lead to a 5% change in demand.
In this situation elasticity is equal to one,
 D

𝐸
P2
Price
P1

0
Q1 Q2
Quantity demanded
Unity or unitary elastic demand
4. Perfectly elastic demand or infinitely elastic demand: Demand is said to be perfectly elastic when a change in
price brings about an infinite effect on the quantity of goods demanded. In other words, a slight increase in
price can make consumers to stop the purchase of the commodity while a slight decrease in price will make
Consumers to purchase all the commodity In this case, elasticity is equal to infinity
D

𝐸 𝑖𝑛𝑓𝑖𝑛𝑖ty

Price

D
D
Quantity supplied
Perfectly elastic demand or infinitely elastic demand

5. Perfectly inelastic demand or zero elastic demand: Demand is said to be perfectly inelastic. If a change in price
has no effect whatever on the quantity of goods demanded. In other words, the same quantity of goods is
demanded irrespective of changes in price. In this case elasticity is equal to zero, i.e. E= 0

E=0
P D
Price

0
Quantity demanded

Perfectly inelastic demand or zero elastic demand

Elasticity of supply
Elasticity of supply may be defined as the degree of responsiveness of the quantity supplied of a commodity to change
in the price of commodity.

Type of elasticity of supply

1. Elastic supply: This is said to be elastic if a small change in price leads to a greater change in the quantity of
goods supplied. In this case elasticity is greater than one or unity. i.e. E= this type of elasticity
is also known as fairly elastic supply

S
𝐸 𝐼𝑛𝑓𝑖𝑛𝑖𝑡𝑦

P2
Price
P1
S

Q1 Q2 Quantity supplied
Elastic or fairly elastic supply curve

2. Inelastic supply: this is said to be inelastic if a large change in price leads to a smaller slight change in the
quantity of goods supplied. In this case elasticity is less than one but greater than zero i.e. E

S
𝐸
P2 𝐼𝑛𝑓𝑖𝑛𝑖𝑡𝑦

Price
P1

Q1 Q2 Quantity supplied
Inelastic or fairly inelastic supply curve

3. Unity or unitary elastic supply: supply is said to be unitary when a change in price leads to an equal change in
the quantity of goods supplied. In other words a 5% change in price will lead to a 5% change in supply. In this
situation elasticity is equal to one. i.e.
S
𝐸
P2
Price
P1

0
Q1 Q2 Quantity supplied

Unitary elastic supply curve

4. Perfect elastic supply or infinitely elastic supply: supply is said to be perfectly elastic when a change in price
brings about an infinite effect on the quantity of goods supplied. In other words, slight increase in price can
 make producers to increase the supply of the commodity while a slight decrease in price will make producers
to stop the supply of the commodity. In this case, elasticity is equal to infinity.

𝐸 𝐼𝑛𝑓𝑖𝑛𝑖𝑡𝑦
P S
Price

Quantity supplied
Infinity or perfectly elastic supply curve

5. Perfectly inelastic supply or zero elastic supply: Supply is said to be perfectly inelastic if a change in price has
no effect whatsoever in the quantity of goods supplied. In this case, elasticity is equal to zero
S

Price

0
Q1 Quantity supplied
Zero or perfectly inelastic supply curve