Introduction

Thus far we have identified three types of elasticity, namely relatively price inelastic (ep <1), unitary elastic (ep= 1) and relatively elastic (ep >1). There are two other interesting theoretical types, namely perfectly inelastic and perfectly elastic.

Perfectly inelastic demand

A perfectly inelastic demand curve occurs when a change in price does not have any impact on the quantity demanded.

In terms of our formula, the percentage change in quantity demanded is equal to 0.

$$
e_p = {0 \over \%∆P}
$$

Here the price elasticity coefficient is equal to zero since the percentage change in quantity demanded is 0, and when you divide 0 by any value, the answer is still 0.

This kind of elasticity might occur when people are highly addicted to some kind of drug or need life-saving medication.

Perfectly inelastic demand

A 10,5% increase in price does not have an impact on the quantity demanded.

Perfectly elastic demand

A perfectly elastic demand curve occurs when a small change in price has a major impact on the quantity demanded. Here, a small percentage change in price causes a percentage change in the quantity demanded that approaches infinity.

$$
e_p = \infty
$$

Graphically, it can be represented as follows:

Perfectly elastic demand

Activity

If the % change in P is greater than the % change in Qd, then demand is...




Correct.

If the % change in P is greater than the % change in Qd, then the demand is relatively inelastic.

Think again.

Relative elastic implies that the % change in P is smaller than the % change in Qd.

Think again.

Unitary elastic implies that the % change in P is equal to the % change in Qd

A relatively elastic demand implies that...




Think again.

If the % change in price is greater than the % change in Qd the demand is relatively inelastic.

Correct.

Relative elastic demand implies that the % change in P is smaller than the % change in Qd.

Think again.

If the % change in price is equal to the % change in Qd the demand is unitary elastic.

A relative elastic demand implies that the price elasticity coefficient is...




Think again.

If the price elasticity coefficient is smaller that one it implies that that the percentage change in price is greater smaller than the percentage change in quantity demanded.

Correct.

A relative elastic demand implies that the percentage change in price is smaller than the percentage change in quantity demanded and the price elasticity coefficient is greater than 1.

Think again.

Unitary elasticity implies that the percentage change in price is equal to the percentage change in quantity demanded.

If a 12% change in P leads to a 6% change in Qd, the demand is...




Correct.

Since the % change in P (12%) is greater than the % change in quantity demand (6%), the demand is relatively inelastic.

Think again. The percentage change in price is greater that the percentage change in quantity demanded.

Think again.

The percentage change in price is greater that the percentage change in quantity demanded.

If a 8% change in price leads to a 12% change in Qd, the demand is




Think again.

The % change in P (8%) is smaller than the % change in quantity demand (12%)

Correct.

Since the % change in P (8%) is smaller than the % change in quantity demand (12%), the demand is relatively elastic.

Think again.

The % change in P (8%) is smaller than the % change in quantity demand (12%)