ELASTICITY OF DEMAND

ELASTICITY OF DEMAND

Elasticity of demand is the demand changes due to factors of demand like (price, income, substitute goods, complimentary goods)

Price elasticity: if a demand of the product changes due to change in price then it is called price elasticity

•  If the quantity purchased changes more than price change, it is called as elastic 
•  If the quantity purchased changes less than price change, it is called as inelastic 

Cross elasticity:  if a demand of one product changes due to change in price of another product is called as cross elasticity

•  The cross elasticity of demand for substitute goods is always negative, if demand for one product increases when the price for the substitute product increases

         Ex: Not all the people can use I phone, most of the people using other android                  phone because android phones are substitute of I phone

• The cross elasticity of demand for complementary goods is positive, if demand for one product increases when the price for complimentary product decreases

         Ex: If price of petrol will decreases demand for bike will increases

income elasticity: If a demand of the product changes due to change in income is called as income elasticity

•  If the quantity purchased changes more than income change, it is called as elastic
•  If the quantity purchased changes less than income change, it is called as inelastic