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2.2.2. Price Elasticity of Demand
Price elasticity of demand is the ratio of proportionate change in the quantity demanded of a given commodity to a given proportionate change in its price.
The term ‘E’ gives the coefficient of price elasticity of demand. If E is greater than one, the demand is said to be elastic. If E is less than one, the demand is said to be inelastic and if E is equal to one, the demand is unitary. The terms elastic and inelastic are only relative terms. Based on the elasticity we have five types of demand.
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Last modified: Friday, 10 February 2012, 6:27 AM