MEANING OF ELASTICITY OF DEMAND
Elasticity of demand is the change the quantity demanded of a commodity with respect to changes in one of the variables on which demands depends. the variables on which demand can depends are:-
It is measurement of percentage change in Quantity Demanded in response to a given percentage change in own price of the commodity.
* Price of the commodity (price elasticity)
* Prices of related goods (cross elasticity)
* Income of consumer (income elasticity)
YOU CAN ALSO READ:- PYQ ECONOMICS
DEGREE OF PRICE ELASTICITY
There are five degree of price elasticity:-
1. Perfectly Elastic Infinity (E = ∞):- Slight fall in price will lead to an infinite increase in the quantity demanded of the commodity and vice-versa
Demand Curve (DC)-Horizontal straight line, parallel to X - Axis
2. Relatively Elastic Greater than one, but less than Infinity(E ≥ 1) If the proportionate change in demand is more than proportionate change in price.
Demand curve - Flatter
3. Unity Elastic One (E=1):- If the proportionate change in demand is equal to the proportionate
change in price DC – Rectangular hyperbola
4. Relatively Inelastic Greater than zero, but less than one (E <1) :- If the proportionate change in demand is less than proportionate change in price.
5. Perfectly inelastic Zero (E = 0):- When the change in the price does not bring any change in demand.
Demand Curve – Vertical, parallel to Y- Axis
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