Question

What is perfectly inelastic demand ? How is it different from relatively elastic demand ?

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Answer 1

Explanation:

Key Takeaways. Elasticity of demand refers to the change in demand when there is a change in another factor, such as price or income. If demand for a good or service is static even when the price changes, demand is said to be inelastic. Examples of elastic goods include luxury items and certain food and beverages.

The price elasticity of demand (PED) measures the change in demand for a good in response to a change in price.

In other words, relatively small changes in price cause relatively large changes in quantity.

EXAMPLE-- There are commodities for which a small change in price will drastically reduce the amount of the commodity demanded. For example, air-travel for vacationers is very sensitive to price. An increase in the air fare will lead the vacationer to choose another mode of transportation like car or lead him to postpone the vacation plan for the time being. Thus for a rise in airlines fare for the vacationers we would see a relatively more drastic reduction in demand towards air travel and hence its the situation of high price elasticity of demand.

Answer 2

Answer:

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A PED coefficient equal to zero indicates perfectly inelastic demand. This means that demand for a good does not change in response to price. Perfectly Inelastic Demand: When demand is perfectly inelastic, quantity demanded for a good does not change in response to a change in price.

When the percentage change in quantity demanded is greater than the percentage change in price, the demand is said to be elastic. In other words, relatively small changes in price cause relatively large changes in quantity. ... But the proportionate change in price is less than the proportionate change in demand.

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