MANAGERIAL ECONOMICS

TOPIC :- PRICE ELASTICITY OF DEMAND

: MEANING AND ITS DEGREE

FACULTY NAME :- Dr. Sofia khan STUDENT NAME :- DEEPAK GUPTA

ROLL NO. :- PG/25/028
Assistant professor
SCHOOL OF MANAGEMENT SCIENCES
VARANASI
 MEANING
Price elasticity of demand is a measure used in economics to show the
responsiveness, or elasticity, of the quantity demanded of a good or
service to increase in its price when nothing but the price changes.
Elasticity = responsiveness of consumer due to the price change of any
commodity.
 DEFINITIONS
 According to ALFRED MARSHALL: “Elasticity of demand may be
defined as the percentage change in quantity demanded to the percentage
change in price.”
 According to A.K.CAIRNCROSS: “The elasticity of demand for a
commodity is the rate at which quantity bought changes as the price
changes.”
 According to J.M.KEYNES: “ The elasticity of demand is a measure of
the relative changes in quantity to a relative change in price.”
 According to KENNETH BOULDING: “ Elasticity of demand measures
the responsiveness of demand to changes in price.”
 Degrees Of Price Elasticity Of
Demand
 Perfectly elastic demand (e=∞)
 Perfectly inelastic demand (e=0)
 Relatively elastic demand (e>1)
 Relatively inelastic demand (e<1)
 Unitary elastic demand (e=1)
 Perfectly elastic demand (e=∞)
 When a small change in price of a product causes a major in its demand, it is
said to be perfectly elastic demand
 Perfectly elastic demand is a theoretical concept and cannot be applied in the
real situation.
 It can be applied in cases , such as perfectly competitive market and
homogeneity products.

In perfectly elastic demand , the demand

curve is represented as a horizontal straight
line , which is shown in figure.
 Perfectly Inelastic Demand (ep=0)
 A perfectly inelastic demand is one when there is no change produced in the
demand of a product with change in price.
 The numerical value for perfectly inelastic demand is zero (ep=0).
 In case of essential goods, such as salt , the demand does not change with
change in price.

In case of perfectly inelastic demand,

demand curve is represented as a
straight vertical line , which is shown
in figure.
 Relatively elastic demand (ep>1)
 Relatively elastic demand refers to the demand when the proportionate
change in demand is greater than the proportionate change in price of a
product.
 The numerical value of relatively elastic demand ranges between one to
infinity. Mathematically, relatively elastic demand is know as more than
unit elastic demand(ep>1).

The demand curve of relatively

elastic demand is gradually
sloping as shown in figure
 Relatively inelastic demand (e<1)
 Relatively inelastic demand is one when the percentage change in demand
is less than the percentage in the price of a product.
 The numerical value of relatively value of relatively elastic demand
ranges between zero to one (ep<1).

The demand curve of relatively

inelastic demand is rapidly
sloping as shown in figure.
 Unitary elastic demand (e=1)
When the proportionate change in demand produces the same change in the price
of the product, the demand is referred as unitary elastic demand . The numerical
value for unitary elastic demand is equal to one (ep=1).

The demand curve for unitary

elastic demand is represented as a
rectangular hyperbola, as shown in
figure.
THANK YOU