Answer to Question #113775 in Microeconomics for Shamiso Ruzvidzo

Question

Price elasticity is used by economists to understand how supply or demand changes given changes in price to understand the workings of the real economy.
Price elasticity of demand can take more than one form. It can be elastic, inelastic or unitary.
Critically discuss elastic, inelastic and unitary conditions/forms of price elasticity of demand through the use of practical examples and graphs.

Answer 1

Elastic demand is the demand when the proportionate change produced in demand is higher than the proportionate change in the price of a product. In elastic demand, demand ranges from 1 to infinity.

Inelastic demand involves the demand in which the percentage change produced in demand is lower than the percentage change in the price of a product. In inelastic demand, demand ranges from 0 to 1

Unitary elastic involves the demand in which the proportionate change in demand creates the same change in a price of a product. The numerical value of unitary elastic demand is equal to 1.