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
Location problem in the plane: In Kent, the council to respond to the people and government needs, it decided to establish 3 community care homes. The towns are recorded with t

Problem 1: (a) Distinguish between political and partisan monetary cycles on inflation and unemployment rates. (b) In the rule versus discretion literature, explain how dy

1. What does a MNC have to consider that a domestic company does not, and how does this impact capital budgeting? in addition to the complications encountered in doing a capital bu

DIGRESSIVE TAX A tax is called digressive when the higher incomes do not make a due contribution or when the burden imposed on them is relatively less. Another way in which

Goverment Banker, Fiscal Agent and Adviser Central banks in all countries acts as the fiscal agent, banker and adviser on all important financial matters to government of thei

Define Williamson''s Model of Managerial Discretion practice?

The only road connecting two populated islands is currently a freeway. During rush hour, there is congestion because of the heavy traffic. The marginal external cost from congestio

Disposable Income This is the income which households actually have available to spend or to save.  To calculate disposal income, which is indicated by Ya, the statistician mu

Let there be two consumers A and B, each buying at most two units of a good. A values having one unit at £10 and having two units at £12 whereas B values having one unit at £8 and

THE KEYNESIAN THEORY OF CONSUMPTION FUNCTION The theory was developed during the Great Depression which plagued Europe and America.  During this time, there was excess capacit