Read the situation and Explain the price elasticity of demand with the help of diagrams:
(a) A slightest rise in price causes the demand to zero.
(b) Total expenditure on the commodity decreases when the price falls.
Dear student,
a) In case of perfectly elastic demand, the price is independent of quantity demanded, i.e. at prevailing price the quantity demanded is infinite. In such a situation if there is a slightest increase in price the quantity demanded will fall to zero.
b) If with a fall in price of a commodity total expenditure on the commodity decreases, the demand of the commodity is said to be inelastic and elasticity of demand is less than unitary.
For example:
In the given table, with fall in price, total expenditure also falls. The elasticity of demand < 1.
Regards
a) In case of perfectly elastic demand, the price is independent of quantity demanded, i.e. at prevailing price the quantity demanded is infinite. In such a situation if there is a slightest increase in price the quantity demanded will fall to zero.
b) If with a fall in price of a commodity total expenditure on the commodity decreases, the demand of the commodity is said to be inelastic and elasticity of demand is less than unitary.
For example:
| Price | Quantity | Total Expenditure |
| 5 | 100 | 500 |
| 4 | 120 | 480 |
Regards