Price Elasticity and Protectionism

Running Head: PRICE ELASTICITY OF DEMAND
PRICE ELASTICITY AND PROTECTIONISM
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PRICE ELASTICITY OF DEMAND 2
Price elasticity of demand is the degree that is used in money matters to describe the
degree of awareness of the quantity necessitated or service to a adjustment in the price when only
the price changes. In other words, it is the proportionate change in the quantity demanded in
response to a unit change in the price. There are different types of price elasticity of demand as
discussed below.
Perfectly Elastic Demand
Demand is said to be perfectly inelastic in a situation whereby the quantity demanded is
increasing infinitely When there is a fall in the price or the quantity demanded goes down to zero
with a slight increase in the quantity demanded (Coglianese , Davis , & Kilian, 2017). This is
also known as infinite elasticity. This elasticity does not have much importance in life since it is
not commonly found in a real-life situation.
(Coglianese , Davis , & Kilian, 2017).

PRICE ELASTICITY OF DEMAND 3
In the above diagram, the prices and quantity follow the x and y-axis. Here the demand
curve is horizontal and it demonstrates that any adjustment in price leads to a fall or rise in the
amount necessitated.
The Perfectly Inelastic Demand Curve
This is whereby demand remains unchanged even if the price changes. It is mostly
referred to as zero elasticity (Colchero , Salgado , & Unar-Munguia, 2015). This elasticity is also
not of practical importance since it is not commonly found in a real-life situation.
(Colchero , Salgado , & Unar-
Munguia, 2015).
Here, the demand curve is a vertical straight line. It is a clear indication that demand
remains constant with the change in price.

PRICE ELASTICITY OF DEMAND 4
Relatively Elastic Demand
This is whereby the proportionate change in ultimatum is greater than the proportionate
adjustment in price. For instance, given that there is a 5% fall in prices and that demand
increases by more than 5%, then this is a relatively elastic demand.
(Coglianese , Davis , & Kilian,
2017).
From the diagram above, the demand curve appears flat showing that demand is elastic.
Any small fall in the price will lead to an upsurge in ultimatum. In the same manner, a reduction
in rates will lead to a lessening in ultimatum.