Types of price elasticity of demand, Managerial Economics

Types of Price Elasticity of demand 

a)    Perfectly inelastic demand

Demand is said to be perfectly inelastic if changes in price have no the quantity demanded so that the demand is infinitely price elastic.  This is the case of an absolute necessity i.e. one which a consumer cannot do without and must have in fixed amount e.g. analysis, insulin etc.

b)         Inelastic demand

This is where changes in price bring about changes in quantity demanded in less proportion so that elasticity is less than one.  This is the case of a necessity or a habit forming commodity e.g. drinks or cigarettes.

c)    Unit Elasticity of demand

Is where changes in price bring about changes in quantity demanded in the same proportion and the elasticity of demand is equal to one or unity.  This is for commodities, which are between a necessity and a luxury, e.g. film going.

d)    Elastic demand

Demand is said to be price elastic if changes in price being about changes in quantity demanded in greater proportion so that elasticity is greater than one.  This is the case of a luxury, i.e. one that can be done without or a commodity with close substitutes.

e)         Perfectly Elastic demand

Demand is perfectly elastic when consumers are prepared to buy all they can obtain at some price and none at an even slightly higher price.

This is the case of perfectly competitive market i.e. where there are many producers producing the same product.  Each of them is too insignificant to increase or reduce the market price.

Posted Date: 11/27/2012 6:34:38 AM | Location : United States







Related Discussions:- Types of price elasticity of demand, Assignment Help, Ask Question on Types of price elasticity of demand, Get Answer, Expert's Help, Types of price elasticity of demand Discussions

Write discussion on Types of price elasticity of demand
Your posts are moderated
Related Questions
Consumer Equilibrium To demonstrate the consumer's equilibrium i.e. the point at which the consumer maximizes utility with a given budget, we need to combine the indifference

What is the equilibrium in the labor market? Explain briefly. Equilibrium in the Labor Market a. The market labor of demand curve is the horizontal total of the individual l

Q. What is External Diseconomies? The expansion of an industry is likely to generate external diseconomies that raise the cost of production. An increase in the size of industr

Causes There are a number of explanations of the business cycle but changes in the level of investment seem to be the most likely.  In the simplest Keynesian model an increase

Price elasticity of demand The price elasticity of demand is defined as the degree of sensitiveness or responsiveness of demand for a commodity to the changes in its price. Mo

What is Cyert and March's behavior theory? What are the demerits.

Question 1: (a) Describe the argument that market entry erodes profits in the long run. (b) Give some reasons and discuss possible strategies used for profits to persist eve

what are the limitation of managerial economics and what is the solution of it?

Q. Explain about Long run production function? Long run is a phase adequately long so that all factors together with capital can be changed. The factors that can be increase

Suppose that the present level of income in the economy is $700 billion. It is determined that in order to decrease the unemployment rate to the desired level, it will be essential