Your SlideShare is downloading. ×
0
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

# Assign On Elasticity Of Demand .Ppt

6,543

Published on

Published in: Education, Business, Technology
0 Comments
0 Likes
Statistics
Notes
• Full Name
Comment goes here.

Are you sure you want to Yes No
Your message goes here
• Be the first to comment

• Be the first to like this

No Downloads
Views
Total Views
6,543
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
345
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

### Transcript

• 1. Elasticity Of Demand
• 2. Meaning
Elasticity of demand is defined as the percent change in quantity demanded to percent change in the price- MARSHALL
Price elasticity of demand measures the degree of responsiveness of quantity demanded of a good to a change in price- BOULDING
The formula for the Price Elasticity of Demand (PEoD) is:PEoD = (% Change in Quantity Demanded)/(% Change in Price)
• 3. Ed = Percentage Change in Quantity Demanded
Percentage Change in Price
= Change in Quantity Demanded ÷ Change in Price
Quantity Demanded Initially Initial Price
= ∆Qd x P
∆P Qd
where
∆Qd= Change in Quantity Demanded
∆P = Change in Price
• 4. Elasticity over a Segment of Demand Curve
Price
D
R
P0
S
P1
D
0
Quantity Demanded
Q0
Q1
• 5. Also called arc elasticity-
Price Elasticity over a Segment of Demand Curve
Q1 – Q0
(P0 + P1)/2
X
ep
=
P1 – P0
(Q0 + Q1)/2
P0 + P1
Q1 – Q0
=
X
Q0 + Q1
P1 – P0
P0 + P1
Q
=
X
P
Q0 + Q1
• 6. Elasticity at a Point on the Demand Curve
• Measurement of point elasticity is same as the price elasticity of demand in a limiting sense
• 7. Here changes in quantity demanded and price are infinitesimally small
• 8. Point elasticity of demand is different at different point on the demand curve
• Elasticity at a Point on the Demand Curve
Price
D
Draw a tangent AB on the demand curve at point R
Slope of AB = OB/OA
Ep = (OB/OA)* (RN/RM)
As triangle AOB, AMR and NRB are similar (OB/OA)= (NB/RN)
Ep = (NB/RN)*(RN/RM)
= NB/RM
Again NB/RM = RB/AR
Ep = RB/AR
Ep = Lower Segment
Upper Segment
Lower Segment
ep
=
Upper Segment
A
S
R
M
D
B
O
N
Quantity Demanded
• 9.
• 10. Price Elasticity, Total Revenue and Total Expenditure
• Total expenditure by the consumer over any given period of time is the number of units of a product purchased over a period Q, multiplied by the price of the product , P
• 11. Total Expenditure = P.Q = Total Revenue
Price
Supply
Total Revenue = OAEQ
Total Expenditure = OAEQ
E
A
Demand
Quantity
0
Q
• 12. Predicting Changes in Total Revenue and Total Expenditure in Response to Price Increase
• 13. Categories of Price Elasticity of Demand
• Perfect elastic demand
• 14. Perfect inelastic demand
• 15. Unit elasticity of demand
• 16. Relatively elastic demand
• 17. Relatively inelastic demand
• 18.
• 19. Difference between Slope and Elasticity
• Slope of the Demand Curve
ðP
ðQ
• Elasticity on the demand curve
• 20. Two demand curves may have the same slope but different elasticities as well as different slope and the same elasticities
=
P
ðP
=
Q
ðQ
• 21. Determinants of Price Elasticity of Demand
• Closeness of substitutes
• 22. The proportion of income spent on the good
• 23. Nature of the commodity
• 24. Extent of uses of the commodity
• 25. Possibilities of deferred consumption
• 26. Brand loyalty
• 27. Habitual usage.
• Thank you
SwagatGoyal