# Elasticity Elasticity Elasticity Elasticity may be defined as the proportionate change in the quantity demanded divided by the proportionate change in price. If a x per cent decrease in price results in a 2 per cent increase in the quantity demanded, elasticity is said to have a value of two. (This value will, strictly speaking, be a minus quantity since as demand increases when price decreases and vice versa, the numerator and denominator of the elasticity expression will have opposite signs and thus the whole expression will be negative. In non-mathematical economics the minus sign is usually ignored.) There are five categories of elasticity. First, perfect elasticity, where an infinitesimal change in price leads to an infinitely large change in demand. Secondly, relatively elastic demand, where a change in price will result in a more than proportionate change in the demand. Thirdly, unitary elasticity, where a change in price results in exactly proportionate change in demand. Fourthly, relatively inelastic demand, where a change in price results in a less than proportionate change in demand. Fifthly, perfectly inelastic demand, where a change in price results in no change in demand. These are graduations in a complete range from nil to perfect elasticity.

## consumeraffairs.org.uk

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