1. ELASTICITY OF -By Suvarna
Kamble.
DEMAND

2. MEANING OF ELASTICITY OF DEMAND:
Term is used to denote a measure of the rate at which
demand changes in response to the change in prices.
It is the percentage change in quantity demanded
divided by the percentage in one of the variables on
which demand depends.
It is Price elasticity of demand , which is usually
referred to as elasticity of Demand.

3. TYPES OF ELASTICITY OF DEMAND:
Price elasticity
Income elasticity
Cross elasticity
Promotional elasticity

4. PRICE ELASTICITY OF DEMAND:
Price elasticity of Demand expresses the response of
quantity demanded of goods to a change in its price.
Definition:
“Elasticity of demand may be defined as the ratio of
the percentage change in demand to the percentage
change in price”
-prof.Lipsey..

5. THUS, PRICE ELASTICITY OF DEMAND IS
THE RATIO OF PERCENTAGE CHANGE
IN AMOUNT DEMANDED TO A
PERCENTAGE CHANGE IN PRICE.
Price elasticity(Ep)=%change in quantity demanded
% change in Price
Ep= ^Q xP = ^Q x P
Q ^P ^P Q
Where, Ep=price elasticity P=Price
Q=Quantity ^Q=Change in quantity demanded
^P=Change in Price.

6. TYPES/DEGREES OF DEMAND:
Perfectly Elastic Demand(E=∞):
In this case the demand for a commodity changes even
though there is no change in Price.
It implies that with a very small Percentage change in
price , the quantity demanded would change indefinitely
& so the seller would not change the Price.

7. Perfectly Inelastic Demand(E=0):
If the demand for a commodity does not change in
spite of an increase or decrease in its Price.

8. Unitary Elastic Demand(E=1)
Price elasticity of demand is unity when the change in
demand is exactly proportionate to the change in price.
Eg: The Price is Rs.10 &the quantity demanded is 100
units &the total outlay is Rs.1000. and if price
increases to Rs.20 & the quantity demanded declines to
50 units , the total outlay is Rs. 1000
In this case demand curve is rectangular hyperbola.

9. Elastic Demand(E>1):
If the Percentage change quantity demanded is greater
than the percentage change in price.
Price elasticity of demand is greater than one.
Eg: The Price Increases from Rs.10 to Rs.20,quantity
demanded declines from 100 units to 40 units.as a result ,
the total outlay declines from Rs. 1000 to Rs.800.

10. on the other hand, if Price declines from Rs.10
to Rs.5 and quantity demanded increases from
100to300 units as a result the total outlay has
increased from Rs.1000 to Rs.1500.
In this case the price and total outlay are
inversely related.

11. Inelastic demand(E<1):
If the Percentage change in quantity demanded is less
than the percentage change in Price .
Price elasticity of demand is less than one.
Eg: when price increases from Rs.10 to Rs.20& the
quantity declines from 100 units to 50 units , the total
outlay increases from Rs.1000 to Rs.1500.

12. On the other hand if the price declines from Rs.10 to
Rs.5 & quantity demanded increases from 100 units to
150 units . the total outlay declines from Rs.1000 to
Rs.750
This shows that the price and total outlay are directly
related.
Because , the quantity demanded changes relatively
slower than the change in price.