What is the Difference Between Elasticity of Demand and Price Elasticity of Demand?

The elasticity of demand and price elasticity of demand are related concepts, but they are not the same. Here are the main differences between the two:

1. Definition: Elasticity of demand measures how demand responds to a change in an economic factor, such as price or income. Price elasticity of demand, on the other hand, specifically focuses on the responsiveness of demand to changes in price.
2. Calculation: The elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in the economic factor (e.g., price or income). The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
3. Interpretation: Elasticity of demand helps to understand how demand for a good or service changes when there is a change in an economic factor, such as price or income. Price elasticity of demand specifically measures the responsiveness of demand to changes in price.
4. Categories: There are five broad categories of elasticity: perfectly elastic, elastic, perfectly inelastic, inelastic, and unitary. The price elasticity of demand can be classified into elastic (elasticity greater than 1), inelastic (elasticity less than 1), or unitary (elasticity equal to 1), depending on the responsiveness of demand to changes in price.

In summary, the main difference between elasticity of demand and price elasticity of demand is that the former measures the responsiveness of demand to changes in any economic factor, while the latter specifically focuses on the responsiveness of demand to changes in price. Both concepts are essential for understanding and analyzing the behavior of demand in relation to economic factors, particularly price changes.

Comparative Table: Elasticity of Demand vs Price Elasticity of Demand

The elasticity of demand and price elasticity of demand are related concepts, but they are not the same. Here's a table to highlight the differences between the two:

To understand these differences better, consider the following examples:

1. As the price of a good increases, consumers purchase more of a substitute good. This is an example of elastic demand because the demand for the original good is sensitive to changes in the price of its substitute.

2. If the price of a good increases by 10% and the quantity demanded of the good decreases by 5%, the demand for the good is inelastic. This is because the percentage change in quantity demanded is less than the percentage change in price.

3. If the price of a good increases by 5% and the quantity demanded of the good decreases by 10%, the demand for the good is elastic. This is because the percentage change in quantity demanded is greater than the percentage change in price.

In summary, elasticity of demand is a broader concept that measures the responsiveness of demand to changes in various economic factors, while price elasticity of demand specifically measures the responsiveness of demand to changes in the price of a good or service.