What is meant by inelastic demand compare it with perfectly inelastic demand?
Answers
Answered by
11
inelastic demand. Demand whose percentage change is less than a percentage change in price. For example, if the price of a commodity rises twenty-five percent and demand decreases by only two percent, demand is said to be inelastic. (See elasticity.)
perfectly inelastic means when a change in price causes a smaller change in demand.
EXAMPLE if the price of a commodity increase 40 % and the demand decrease only 10% .
there are so many factors that make demand inelastic .
1.NO substitute .If you have a car, there is no alternative but to buy petrol to fill up the car. If you rely on the train to get to work, the train firm can increase prices with little fall in demand
2.LITTLE COMPETITION . If a firm has monopoly power then it is able to charge higher prices. For example, prices on motorway service stations tend to be higher, because consumers can’t choose where to buy food, without leaving the motorway.
3.A SMALL PERCENTAGE OF INCOME . If you a good like salt is a small percentage of income, you may be less concerned about price.
BOUGHT INFREQUENTLY .If you buy a good infrequently, such as salt, you are less likely to be sensitive to price.
SHORT RUN .In the short-run, demand tends to be more price inelastic. It takes time for consumers to look for alternatives
perfectly inelastic means when a change in price causes a smaller change in demand.
EXAMPLE if the price of a commodity increase 40 % and the demand decrease only 10% .
there are so many factors that make demand inelastic .
1.NO substitute .If you have a car, there is no alternative but to buy petrol to fill up the car. If you rely on the train to get to work, the train firm can increase prices with little fall in demand
2.LITTLE COMPETITION . If a firm has monopoly power then it is able to charge higher prices. For example, prices on motorway service stations tend to be higher, because consumers can’t choose where to buy food, without leaving the motorway.
3.A SMALL PERCENTAGE OF INCOME . If you a good like salt is a small percentage of income, you may be less concerned about price.
BOUGHT INFREQUENTLY .If you buy a good infrequently, such as salt, you are less likely to be sensitive to price.
SHORT RUN .In the short-run, demand tends to be more price inelastic. It takes time for consumers to look for alternatives
Similar questions