5 Types of Price Elasticity of Demand – Full Explanation
Price elasticity of demand is known as the degree of the change in the product demand in response to a change in the price. Price elasticity is used to understand the relationship between the consumption of a product when the price diversifies. There are five types of price elasticity of demand based on this relationship.
Following are the Types of Price Elasticity of Demand.
- Perfectly Inelastic Demand
- Inelastic Demand
- Unitary Elastic Demand
- Elastic Demand
- Perfectly Elastic Demand (Infinite Elasticity)
1. Perfectly Inelastic Demand
Perfectly inelastic means demand is steady even though the price changes. Demand is fixed even though the price increase or decrease. The same quantity will be demanded despite the price.
The elasticity coefficient of perfectly inelastic demand is zero (0). Ed = 0.
2. Inelastic Demand
Inelastic means the demand changes in a small variation in response to a comparatively high variation in a price change. Product demand is inelastic when the price change has a minor effect on the quantity demand.
The elasticity coefficient of inelastic demand is less than one (1). Ed < 1.
3. Unitary Elastic Demand
Unitary elastic demand means the demand changes in a similar proportion to a change in price. This is where the price decrease equally increases the demand, and a price increase equally decreases demand.
The elasticity coefficient of unitary elastic demand is equal to one (1). Ed = 1.
4. Elastic Demand
Elastic demand means the demand changes in a large variation in response to a comparatively small variation in a price change. Product demand is elastic when the price change has a greater effect on the quantity demand.
The elasticity coefficient of elastic demand is greater than one (1). Ed > 1.
5. Perfectly Elastic Demand (Infinite Elasticity)
Perfectly elastic demand (infinite elasticity) means even a minor variation in the product price results in an infinite change in the quantity demanded. The demand is infinite only at a specific price. Even a slight change in the price will eliminate the entire demand for the product, resulting in zero demand.
The elasticity coefficient of perfectly elastic demand is infinite. Ed = ∞.
- Unitary Elastic Demand: Definition, Examples, Curve
- Inelastic Demand: Definition, Examples, Diagram
- Perfectly Elastic Demand: Explanation with Examples
- Difference Between Elastic Demand and Inelastic Demand
- Difference Between Unitary Elastic and Inelastic Demand
- Explanation and Calculation of Elasticity Coefficient
- Price Elasticity of Demand Explanation