Demand

  The  Price elasticity of demand is the degree of responsiveness of demand to change in price. It is the ratio of percentage change in amount demanded to a percentage change in price. It may be denoted as:- Ep= % Change in Quantity Demanded / % Change in Price         = -∆q÷∆p * p÷q Ep , the coefficient of price elasticity of demand is always negative because when price changes demand moves in the opposite direction. It is however customary to ignore the negative sign. Types of price elasticity of demand Price elasticity of demand can be of five types. These are:- 1) Unity:- It can be unity when the change in demand is exactly proportional to the change in price. For example 20% change in price will bring about 20% change in demand. So, Ep= 20%÷20%=1 Unit price elasticity of demand is express diagrammatically in the figure below: **Draw diagram** 2) Greater than unity or relatively elastic:- This situation arises when change in demand is more in propo...