Elastic demand
If demand is elastic,
Proportionate change in quantity demanded of X
Proportionate change in price of X
A given percentage change in price causes a larger percentage change in quantity demanded (Figure 2.29(a)). The demand responds more than proportionately to a change in price. For instance, a one percent increase in price results into a more than one percent decline in the quantity demanded.
Demand is usually elastic for commodities that have good substitutes (Toyota Sprinter), expensive commodities (cars), non-essential commodities or luxurious goods (necklace).
Elastic demand and perfectly elastic demand.
Elastic demand and perfectly elastic demand.
The limiting case is the one of perfectly elastic demand curve (Figure
2.29(b)). The price is constant but demand changes infinitely. A demand curve is said to be perfectly elastic when any quantity can be bought at the prevailing price, but any rise in price will cause quantity demanded to fall to zero. Such a demand curve is true with commodities that have perfect substitutes. However, such commodities are rare to find in practice.