Question
In: Economics
What is perfectly elastic demand and perfectly inelasticity of demand?
What is perfectly elastic demand and perfectly inelasticity of demand?
Solutions
Expert Solution
Answer :-
Price elasticity of demand is the responsiveness of the quantity demanded of a commodity to changes in its price; defined as the percentage change in quantity demanded divided by the percentage change in price.
Price and quantity demanded are inversely related.
Ep= % change in quantity demanded/ % change in price
perfectly elastic demand :
when a 1% change in the price would result in an infinite change in quantity demanded.
A demand that has the characteristic that even the slightest increase in price will lead to zero quantity demanded.
The price elasticity of demand equals infinity
Perfectly inelastic demand:
When a 1% change in the price would result in no change in the quantity demanded.
A demand that exhibits zero responsiveness to price changes. No matter what the price is, the quantity demanded remains the same.
The price elasticity of demand for a good has a value of zero
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