Factors Affecting Price Elasticity of Demand

Running Head: PRICE AND DEMAND
FACTORS AFFECTING PRICE ELASTICITY OF DEMAND
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PRICE AND DEMAND 2
Price elasticity of demand (PED) refers to a measure that shows the receptiveness of the
amount of a good that is necessitated to the change in the price of the same commodity when
nothing but the price changes. Precisely it is the percentage change in the quantity of a product
necessitated as a result of a change in its price. There are different types of elasticity of demand
as shown below:
Perfectly elastic demand
This is whereby a trivial adjustment in price leads to a huge adjustment in the ultimatum.
In this case, a minor increase leads to a reduction in demand to zero whereas a small reduction in
price upsurges the demand to infinity.
(Seetaram & Forsyth, 2016).
From the above diagram, at price P, the demand for this commodity is infinite. However,
any rise in price will reduce the demand to zero.

PRICE AND DEMAND 3
Perfectly inelastic demand
This is whereby any change in price does not affect the quantity of a commodity
demanded. The arithmetical worth for a perfectly inelastic demand is zero (ep=0).
(Seetaram & Forsyth, 2016).
The following discussion shows the factors that affect the price pliability of ultimatum.
Relatively elastic demand
This refers to a demand whereby the equivalent adjustment in ultimatum is larger than the
equivalent adjustment in the rate of a commodity. The elasticity here ranges from 1 to infinity
(ep>1)

PRICE AND DEMAND 4
(Seetaram & Forsyth, 2016).
Relatively inelastic demand
This is whereby the proportionate alteration in demand is less than the proportionate
variation in price. If the price of product fluctuates by say 20%, then the ultimatum can adjust by
10%, and hence the demand is said to be relatively inelastic.
(Seetaram & Forsyth, 2016).
From the above diagram, it can be seen that the adjustment from OQ1 TO OQ2 is slighter than
the adjustment from OP1 to Op2.
Unitary elastic demand
This is whereby a change in the quantity demanded of commodity results to a
proportionate change in the price of the commodity. Here, the elasticity value is equal to a unit,
i.e. (ep=1).