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What is meant by inelastic demand? Compare it with perfectly inelastic demand.

Answer:

Elasticity is a measure of the responsiveness of the quantity demanded to a change in price. Inelastic demand means elasticity less than 1.

There, percentage change in quantity demanded is less than a percentage change in price.

For Ex. Percentage change in quantity demanded is 10%, Percentage change in price = 20%

So, Elasticity (Ed < 1) = 0.5

Perfectly inelastic demand.

When increase are decrease in price does not-effect the quantity demanded, it is known as perfectly inelastic demand.

For Ex. - Price change by 10% but quantity demanded remains the same i.e.,

Percentage change in quantity demand = 0

Percentage change in price = 20%

So, elasticity is 0.