Distinguish between
1) Relatively elastic demand and relatively inelastic demand.
Relatively elastic demand | Relatively inelastic demand |
In this case, the change in price leads to a proportionately large change in the quantity demanded. | In this case, the change in price leads to a proportionately less change in the quantity demanded. |
It represents a flatter demand curve. | It represents a steeper demand curve. |
Symbolically it is represented as Ed > 1 | Symbolically it is represented as Ed < 1 |
For example- 50% fall in price leads to 100% rise in quantity demanded. | For example- 50% fall in price leads to 25% rise in quantity demanded. |
2) Perfectly elastic demand and perfectly inelastic demand.
Perfectly elastic demand | Perfectly inelastic demand |
It implies that the demand is infinitely responsive to any change in the price of the good. | It implies that the demand is completely unresponsive to any change in the price of the good. |
The perfectly elastic demand curve is parallel to the OX axis. | The perfectly elastic demand curve is parallel to the OY axis. |
Symbolically it is represented as Ed = ∞ | Symbolically it is represented as Ed = 0 |
For example- 10% fall in price may lead to an infinite rise in demand. | For example- 20% fall in price will have no effect on quantity demanded. |