Percentage Method- This method measures elasticity of demand as a ratio of percentage change in demand to percentage in price.
On the basis of this method elasticity of demand is of three types
i) More than unitary elastic demand (Ed >1) - When percentage change in demand of a commodity is more than the percentage change in its price, such demand is called highly elastic demand.
Suppose due to 5% increase in price of a commodity, demand of commodity decreases by 8% then elasticity of demand will be more than 1.
ii) Unitary elastic demand(Ed =1) - When percentage change in demand of a commodity is equal to the percentage change in its price, such demand is called unitary elastic demand.
Suppose due to 5% increase in price of a commodity, demand of commodity decreases by 5% then elasticity of demand will be equal to 1.
iii)Less than unitary elastic demand(Ed< 1) - When percentage change in demand of a commodity is less than the percentage change in its price, such demand is called less than unitary elastic demand.
Suppose due to 5% increase in price of a commodity, demand of commodity decreases by 4% then elasticity of demand will be equal to 1.
