Introduction To Economics

INTRODUCTION TO ECONOMICS Prof. Madhu Bharti

(Other things are held constant)

(Demand is inversely related with price). If prices of petrol/diesel would rise from Rs. 50/ liter to Rs. 100/liter, consumers will look for another options like public transport.

reasons

When price falls from P to P2 demand rises from M to M2

Price Elasticity of Demand 

Measures how much the quantity demanded of a good changes when its price changes

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% change in quantity demanded / % change in price

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Elastic demand- quantity demanded responds to price changes (substitute goods)

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Inelastic – quantity doesn’t respond to price (for eg. Basic goods)

Elasticity and Revenue 

When demand is price elastic, price decrease leads to increase in revenue

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When demand is price inelastic price decrease may not increase the revenue

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Air travel: elastic/ inelastic?

Sq.mt .

Sq.mt .

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