ELASTICITY OF DEMAND

 Elasticity means % change in one variable

relative to a % change in another variable .It is
a technical term used by economists to describe
the responsiveness of the demand for a
commodity.
% change in quantity demand
Ed=
% change in determinants of demand
Price elasticity is classified into 5 types
1) Perfectly elastic demand.E=∞

2) Perfectly inelastic demand.E=0

3) Unit elastic demand.E=1

4) Relatively elastic demand.E›1

5) Relatively inelastic demand.E‹1

  A small change in price will change the
quantity demanded in infinite amount .A slight
change in price the consumer starts buying it.
The quantity demanded does not change
regardless of the % change in the price.


Price Demand
30 10
50 10
A smaller % change in a price leading to larger
change in quantity demand.

A change in price leads to smaller change in
demand.

PRICE QUANTITY

500 20

750 15
The % change in quantity demand is same as the
% change in price.


Price Demand
5 25
6 30
Demand measures the responsiveness of quantity
demanded to a change in income.It is measured
by dividing the % change in quantity demanded
by the % change in income.
% change in quantity demanded
Ed=
% change in income
The increased income of the individual doesnot
make any difference in the demand for the
commodity.


Income Demand
20000 100
30000 100
The increase in income of consumer leads to less
purchase of those commodities.
Solution: Ei =%change in quantity demanded
%change in income
=20/10
=-2
The change in income leads to same percentage
change in demand.

income quantity
30000 25

36000 30
The change in income increase the demand for the
commodity but at a lesser percentage than the
change in income.


Income Demand
9000 950
9800 980
The small change in income leads to drastic
change in demand.The change in income increase
the demand for a commodity more than the
change in income.


Income Demand
2000 4
2400 5
The quantity demanded of a particular
commodity varies according to the price of other
commodity.
% change in demand of commodity A
Ed=
% change in price of commodity B


Quantity Price

800 55

600 45
 Presented by
B.Lakshmani
Reg no :18L31E0092