5 degrees of elasticity pf supply
Answers
Answer:
“Elasticity of demand may be defined as the percentage change in quantity demanded to the percentage change in-price.”
Explanation:
Degrees of Price Elasticity:
Different commodities have different price elasticity’s. Some commodities have more elastic demand while others have relative elastic demand. Basically, the price elasticity of demand ranges from zero to infinity. It can be equal to zero, less than one, greater than one and equal to unity.
The elasticity or responsiveness of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price and diminishes much or little for a given rise in price”.
Perfectly Elastic Demand:
Perfectly elastic demand is said to happen when a little change in price leads to an infinite change in quantity demanded. A small rise in price on the part of the seller reduces the demand to zero.
Perfectly Inelastic Demand:
Perfectly inelastic demand is opposite to perfectly elastic demand. Under the perfectly inelastic demand, irrespective of any rise or fall in price of a commodity, the quantity demanded remains the same. The elasticity of demand in this case will be equal to zero (ed = 0).
Relatively Elastic Demand:
Relatively elastic demand refers to a situation in which a small change in price leads to a big change in quantity demanded. In such a case elasticity of demand is said to be more than one (ed > 1).