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Microeconomic Theory

Notes

Express your view about elasticity of demand.

6.10 Two Extreme Situations of Price Elasticity of Demand

Two Extreme situations of price relativity of demand are (1) Zero and (2) Infinity.

1. Zero Price Elasticity of Demand: Elasticity of demand becomes zero when no change in quantity
demanded of goods to change in the price. It means no matter how much are brought in price, there
will not be any contraction and extension in its quantity demanded. This situation is called Perfectly
Inelastic Demand.

Zero Price Elasticity of Demand (E = 0)

In Fig. 6.13 a vertical straight line is presented which clears that no matter how much change will occur
in price, demand OD of goods will remain stable. In this way, demand curve is called Perfectly Inelastic
Demand Curve. Any extension or contraction is expressed by this demand curve.

Fig. 6.13

Y
D
Perfectly Inelastic
Demand Curve
Price (`) E = 0

D
O X
Quantity

2. Infinity Price Elasticity of Demand: Elasticity of demand becomes infinity when quantity demanded
changes infinitely with also very small change in price. Elasticity of demand becomes infinity when
however much quantity of product of a firm is demanded at current prices, then entirely product
of firm is not demanded.

Infinity price Elasticity of demand (E = ∞)

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