2.12 : Degrees of Elasticity of Demand

Degrees of elasticity of demand describes how the demand for different goods changes to price changes. It categorizes goods into five degrees based on their responsiveness.

First are the perfectly elastic goods. If the price increases even slightly, the quantity demanded for these goods drops to zero, and if the price decreases, the quantity demanded becomes extremely large. This leads to an elasticity of infinity.

Next, relatively elastic goods. They have a significant responsiveness to price changes. The absolute value of the elasticity of these goods is greater than one but less than infinity.

Then, there are unitary elastic goods.

Their elasticity stands at an absolute value of one, indicating that the change in quantity demanded perfectly matches the change in price.

Next, relatively inelastic goods. They exhibit a smaller change in quantity demanded in response to the price change.

Their elasticity ranges from an absolute value of less than one to greater than zero.

Finally, there's the case of perfectly inelastic goods.

Regardless of price changes, the quantity demanded remains the same, leading to an elasticity value of zero.