Distinguish between:

1. Perfectly elastic demand and perfectly inelastic demand

2. Relatively elastic demand and relatively inelastic demand

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Solution

1)

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.

Here, E_d = ∞

Here, E_d = 0

2)

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.

Here, E_d > 1

ere, E_d < 1

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Show with the help of a diagram, the effect on equilibrium price and quantity when:
(i) Demand is perfectly elastic and supply decreases.
(ii) Supply is perfectly inelastic and demand increases.
(iii) The demand curve is perfectly elastic and the supply curve shifts outwards.

Q. State whether the following statement are TRUE and FALSE.

1. Demand for luxuries is elastic.

2. Perfectly inelastic demand curve is parallel to the X axis.

3. Total outlay is price multiplied by quantity.

4. Unitary Elastic Demand rarely occurs in practice.

5. Concept of Elasticity of Demand is useful for finance minister.

Q. What is meant by inelastic demand? Compare it with perfectly inelastic demand.

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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.
Here, E_d = ∞	Here, E_d = 0

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.
Here, E_d > 1	ere, E_d < 1

Distinguish between: 1. Perfectly elastic demand and perfectly inelastic demand 2. Relatively elastic demand and relatively inelastic demand

Distinguish between:

1. Perfectly elastic demand and perfectly inelastic demand

2. Relatively elastic demand and relatively inelastic demand