MANAGERIAL ECONOMICS

TOPIC:ELASTICITY OF DEMAND
BY, N.ANISHA 11021E0101

ELASTICITY OF DEMAND

ELASTICITY: is the measurement of how changing one economic variable affects others.

ELASTICITY OF DEMAND: measures the responsiveness of quantity demanded to a change in any one of the demand determinants by keeping other factors constant

Price Buyer & Seller Income

Market compet ition

Determinants of Demand

Quality

Taste & Prefere nce

Future expecta tion

Substitu te good

TYPES OF ELASTICITY OF DEMAND

Price Elasticity of Demand Income Elasticity of Demand Cross Elasticity of Demand Promotional or Advertisement Elasticity of Demand

PRICE ELASTICITY OF DEMAND

"The ratio of proportionate change in quantity demanded caused by a given proportionate change in price".
Ed = %Q %P

Here: Ed stands for price elasticity of demand. Q stands for original quantity. P stands for original price. stands for a small change.

DEGREES OF ELASTICITY OF DEMAND

PERFECTLY ELASTIC DEMAND

y
P

x1
x axis = quantity demanded y axis = price

x2

PERFECTLY INELASTIC DEMAND

y
P
0

P1

E=0

x axis = quantity demanded y axis = price

UNITARY ELASTICITY OF DEMAND

y E= 1 P
D

P1

x0 x1
x axis = quantity demanded y axis = price

RELATIVE ELASTICITY OF DEMAND

y E>1
P
0

P1

P
D

x0
x axis = quantity demanded y axis = price

x1

RELATIVE INELASTICITY OF DEMAND

x axis = quantity demanded y axis = price

THANK YOU