"Elasticity"- A degree of responsiveness

Meaning of Elasticity:

An Elasticity is a measure of the sensitivity of changes of one variable to another. 

It is the percentage change that occur on one variable in response with the changes in the other variable.

Types of Elasticities:

1. Price elasticity of demand
2. Income elasticity of demand

Methods of calculating the elasticity:

• Point elasticity: Calculated at a given point of time.

• Arc elasticity: Average elasticity over a given range of functions on a curve between the two points.

1. Price elasticity of demand:  It is the degree of responsiveness in the changes in demand to the changes in the price.

    There are five types of price elasticity of demand

• Perfectly elastic demand: There will be a greater change in the demand to the small change in price.(EP=∞)
  

• Perfectly inelastic demand: consumers don't respond to the changes in the price. This is the place where the demand remains almost the same.(Ep=0)
  

• Unitary elastic demand: It is the place where the changes in the demand and the price are the same (Ep=1)
  

• Relatively elastic demand: The change in the demand is less than the change in the price(Ep>1)
  

• Relatively inelastic demand: The change in the quantity demanded is more than the percentage change in the price i.e.., the rate of change of quantity demaded is more than the rate of change in price. This is the place where consumers general have a temdeten to shift so that it increases the demand of it.(EP<1)
  

2. Income elasticity of demand: It is the responsiveness of the quantity demanded for a good to a change in the income of the consumer. It is the genrgen concept where the consumer tries to spent money if there are changes in the income of the respective.

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