Elasticity Of Demand

Elasticity of demand The law of demand (price & demand are inversely correlated) represent only a qualitative statement, while the elasticity of demand represent a “quantitative statement” this concept indicate the degree of responsiveness of quantity demanded to changes in market price. Thus “the elasticity of demand is a measure of the relative” change in quantity demanded in response to a relative change in price on a given demand curve

Classification of elasticity of demand   

Price elasticity of demand Cross elasticity of demand Income elasticity of demand

Price elasticity of demand 

The price elasticity of demand measure the responsiveness in the quantity demanded of a commodity change in its price

Types of price elasticity of demand 

Perfectly elastic demand elasticity is infinite when some “small price reduction raise the demand zero to infinity” in such case demand is said to be perfectly elastic.

Perfectly inelastic demand The quantity demanded does not change by the price affect.

Relatively elastic demand 

Qty. demanded change by a larger % than does price means .if price reduce by 10% demand will effect more than 10% and vica versa .

Relatively inelastic demand 

Qty. demanded change by a smaller % than does price.

Unitary elastic demand 

Qty. demanded change by exactly the same % as does price