Solution:

Degrees of Price Elasticity of Demand:

The Price Elasticity of Demand is commonly known as the elasticity of demand, which refers to the degree of responsiveness of demand to the change in the price of the commodity.

(1) Perfectly Elastic Demand (Ep=á):

• When minor, nothing or as good as zero percentage change in price results in tremendous percentage change in demand, it is known as perfectly elastic demand.

• We can say in other words that it is a situation in which demand of a commodity continuously changes without any change in price. It can be explained with the help of following example and diagram.

(2) Highly Elastic Demand (e>1):

• When less percentage change in price of commodity and if as compared to that more percentage change in demand is there, it is known as highly elastic demand.

• We can say in other words that it refers to a situation in which percentage change in demand of commodity is higher than percentage change in price of that commodity.

• We can explain this with the help of following example and diagram:

(3) Unitary Elastic Demand (e=1):

• When equal percentage or a proportionate change in price of commodity and demand of commodity is there, it is known as unitary elastic demand .

  • It means that percentage change in demand of a commodity is equal to percentage change in price.

• We can explain this with the help of following example and diagram:

(4) Highly Inelastic Demand (e<1):

• When as compared to price less percentage change in demand of that particular commodity is there it is known as highly inelastic demand.

• It means when percentage change in demand of a commodity is less than percentage change in demand in price.

• We can explain with the help of following example and diagram:

(5) Perfectly Inelastic Demand (e=0):

• When extreme percentage change in price of the commodity and if minor, nothing or as good on zero percentage in demand is known as perfectly inelastic demand.

• We can explain with the help of the following example and diagram: