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Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
Assign On Elasticity Of Demand .Ppt
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Assign On Elasticity Of Demand .Ppt

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  • 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

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