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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour4 Marks
Question
Distinguish between
  1. Elastic and inelastic demand
  2. Perfectly elastic and perfectly inelastic demand.
✓

Answer

  1. When the percentage change in quantity demanded is more than the percentage change in price, then the demand for the commodity is said to be “elastic”. The coefficient of price elasticity of demand in this case is greater than unity, i.e., $e_D > 1$, whereas when the percentage change in quantity demanded is less than the percentage change in price, then the demand for the commodity is said to be “inelastic”. The coefficient of price elasticity is less than unity, i.e., $e_D < 1$.
  2. When the demand for a commodity rises or falls despite of no change in its price, the demand for the commodity is said to be "perfectly elastic”. The coefficient of price elasticity of demand in this case is infinity, i.e., ep = oo whereas when the demand for a commodity does not change as a result of change in its price, the demand is said to be "perfectly inelastic”. It is also called zero elastic demand. The coefficient of price elasticity of demand in this case is zero, i.e., $e_D = 0$.

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