Elasticity of Demand
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If the demand curve has a constant slope, the elasticity of demand isMarks:1
higher at higher prices.
Explanation:In case of a straight line demand curve (constant slope) the elasticity of demand is greater at higher prices as according to point method the elasticity of demand is estimated as the ratio of lower segment to higher segment.
In case of perfectly inelastic demand, with a fall in priceMarks:1
there will be no change in quantity demanded.
Explanation:If the demand is perfectly inelastic then any change in price of the commodity will not affect the quantity demanded by the consumer. The demand curve will be parallel to the y- axis.
The elasticity of demand of a rectangular hyperbola shaped demand curve isMarks:1
For a rectuangular hyperbola shaped demand curve, percentage change
in price along the demand curve always leads to equal percentage change in
quantity. Therefore, elasticity of demand is equal to 1 at every point on this demand curve.
The elasticity of demand of a vertical demand curve isMarks:1
In a vertical demand curve, price change never leads to a change
in the demand for such a demand curve and thus elasticity of demand is always zero.
A change in quantity demanded as a result of change in real income due to change in price is calledMarks:1
A fall in price increases the real income of a consumer with the result that he buys more when the price falls and vice-versa.This leads to change in quantity demanded with the same money income of the consumer.