Elasticity of Demand

Elasticity of demand :

The  change in the responsiveness of demand in respect to the inflation & deflation in the price of the given commodity.

             Ed = Relative change in demand

                         Relative change in price

Kinds of Elasticity of demand :-

1.     Price elasticity of demand :-

The movement/ change in the Quantity demanded of a commodity due to the movement/ change in its price.

Types of Price elasticity :-

a)     Perfectly elastic demand :A small fall in price leads to infinite increase in quantity demanded and vice versa.

                          Ed= Infinity

b)    Perfectly inelastic demand :No impact  on demand if there is any fall in price of the good.

                          Ed = 0

c)     Relatively elastic demand : A very small fall in the price leads to substantial change in demand & vice versa.
                     Ed > 1

d)    Relatively inelastic demand :Is there any big fall in price will have moderate change in demand of commodity.

                          Ed< 1

2  2.     Income elasticity of demand :- 

           The ratio of proportionate change in the Quantity demanded of the commodity to a        given proportionate change in the income of consumer.

3  3.     Cross elasticity of demand :-

     The responsiveness of the demand for one commodity such as X to the change in           the price of another commodity Y.