Where the percentage change in price is smaller than the percentage change in quantity demanded, we have a relatively elastic demand. When the percentage change in price is smaller than the percentage change in quantity demanded, the price elasticity coefficient will have a value of more than 1.
In other words:
- If ep> 1, we have a relatively elastic demand.
In our table, goods and services with a relatively elastic demand are things such as private education, motor vehicles, restaurant meals and fresh tomatoes. They all have an elasticity coefficient of more than 1. What this means is that the quantity demanded is extremely sensitive to a change in the price. On the basis of this, we can argue that people are relatively responsive or sensitive to adjusting their quantity demanded if the price changes. In the case of private education, which has a price elasticity of 1,1, this implies that a 10% rise in the price of private education will decrease the quantity demanded by 11% – the percentage change in price is less than the percentage change in quantity demanded. This is then referred to as a relatively elastic demand.
Graphically, a relative elastic demand can be represented as follows:
Examples are: private education, beef and fresh tomatoes.
A 10,5% increase in price decreases the quantity demanded by 29%. The higher the price elasticity of demand, the flatter the demand curve will be in the particular price range.