ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is...
-
Upload
jeremy-sharp -
Category
Documents
-
view
212 -
download
0
Transcript of ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is...
![Page 1: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/1.jpg)
ELASTICITY OF DEMAND
Degree of responsiveness of demand to change in any of its
determinants is called elasticity of demand
![Page 2: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/2.jpg)
We have three different concepts of elasticity of demand
• Price elasticity of demand
• Cross elasticity of demand and
• Income elasticity of demand
![Page 3: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/3.jpg)
Price elasticity of demand
• Price elasticity of demand or elasticity of demand, is the degree of responsiveness of the demand for commodity to a change in its price.
• Ed=Percentage change in quantity demanded
• Percentage change in price
Ed=
![Page 4: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/4.jpg)
Value of Elasticity Coefficients and their Description
Value of Elasticity coefficient
Type of elasticity Description
Ed=0 Perfectly Inelastic Quantity demanded does not change with price at all
Ed<1 Inelastic or less than unit elastic
% change in demand is less than % change in price
![Page 5: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/5.jpg)
Ed=1 Unit elastic
% change in demand is equal to % change in price
Ed>1 Elastic or more than unit elastic
% change in demand is more than % change in price
Ed=∞ Perfectly elastic
Purchasers are prepared to buy all they can obtain at some price and none at all at an even slightly higher price.
![Page 6: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/6.jpg)
Perfectly Inelastic
Q
price
![Page 7: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/7.jpg)
Perfectly Elastic
quantity
Price
![Page 8: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/8.jpg)
![Page 9: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/9.jpg)
Unit Elastic
![Page 10: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/10.jpg)
Inelastic
quantity
Price
![Page 11: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/11.jpg)
![Page 12: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/12.jpg)
Elastic
quantity
price
![Page 13: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/13.jpg)
Flat and steep curve
• More generally we can say that elasticity of demand at a common point will be more on a flatter curve than on a steeper curve.
![Page 14: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/14.jpg)
quantity
price
d
d
d,
D,
R
A BC
![Page 15: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/15.jpg)
Methods of Measurement of Price Elasticity of Demand
• Total Outlay Method or Total Expenditure Method
• Point Method and
• Arc Method
![Page 16: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/16.jpg)
Total out lay Method
Sugar
Cloth
Cheese
P Q TQ P Q TQ P Q TQ
18 10 180 18 10 180 18 10 180
15 11 165 15 12 180 15 14 210
12 12 144 12 15 180 12 20 240
![Page 17: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/17.jpg)
![Page 18: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/18.jpg)
Point Method
• Measurement of elasticity on demand curve at a point is known as point elasticity of demand.
• Ed= Lower segment of the demand curve
– Lower segment of the demand curve
![Page 19: ELASTICITY OF DEMAND Degree of responsiveness of demand to change in any of its determinants is called elasticity of demand.](https://reader035.fdocuments.in/reader035/viewer/2022072016/56649eea5503460f94bfb934/html5/thumbnails/19.jpg)
Point Method
Quantity
priceEd=1
Ed=1
Ed<1
Ed
Ed>1
Ed=
=0
∞