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1. N.K.E. society's college of arts,
commerce and science
• Topic: Elasticity of Demand
Presented by : Ashish Tiwari
Sachin yadav
and Altamash Ansari

2. Introduction of
Elasticity of Demand
Understanding how demand changes in response to a change in price or
income is crucial for any business to remain competitive in the market. In
this presentation, we will explore different types of elasticity of demand
and their significance.

3. Definition of elasticity of demand
Elasticity of demand refers to the degree of responsiveness of the quantity demanded of a product to
changes in its price. It indicates how much the quantity demanded will change in relation to a change in
price, helping to understand consumer behavior and market dynamics.
Elasticity of demand is a concept in economics that quantifies the responsiveness of the quantity
demanded of a good or service to changes in its price. It helps measure the sensitivity of consumer
demand to price fluctuations, providing insights into the behavior of buyers in the market.

4. Type of Elasticity of Demand
1 Price Elasticity of
Demand
Measures the
responsiveness of
quantity demanded with
respect to changes in
price.
2 Income Elasticity
of Demand
Measures the sensitivity
of quantity demanded to
a change in income.
3 Cross Elasticity of
Demand
Measures the impact of
a change in the price of
one product on the
demand for another
product.

5. Type of Price elasticity of demand
1)Perfectly elastic of demand 4)Relatively elastic of demand
2)Perfectly inelastic of demand 5)Relatively inelastic of demand
3)Unitary elastic of demand

6. Perfectly elastic of demand
When a slight or zero change in the price
brings about an infinite change in the
quantity demanded of that commodity, it is
called perfectly elastic demand. It is only
a theoretical concept

7. Perfectly inelastic of
demand
When a percentage change in price has
no effect on the quantity demanded of a
commodity it is called perfectly inelastic
demand.

8. Unitary elastic of demand
When a percentage change in price leads to a
proportionate change in quantity demanded
then demand is said to be unitary elastic.

9. Relatively elastic of
demand
When a percentage change in price leads to more than proportionate
change in quantity demanded, the demand is said to be relatively elastic.

10. Relatively inelastic of
demand
When a percentage change in price leads
to less than proportionate change in the
quantity demanded, demand is said to be
relatively inelastic.

11. Factors affecting Elasticity of demand
1) Nature of Product 2) Income level
3) Availablity of Substitute 4) Habits
5) Time period

12. Nature of product
The nature of a commodity can significantly affect its elasticity of demand. Generally, necessities like
food and basic utilities tend to have inelastic demand, meaning price changes have a limited impact on
quantity demanded. Luxuries, on the other hand, often have more elastic demand, as consumers can
easily adjust their consumption based on price fluctuations. Additionally, the availability of substitutes, the
proportion of income spent on the commodity, and its perceived necessity all contribute to the elasticity of
demand for a particular product.

13. Income level
the effect of income on the elasticity of demand depends on the type of good being considered (normal,
luxury, or inferior) and whether the change in income leads to a significant change in the quantity
demanded.

14. Availability of Substitute
When there are close substitutes readily available for a product, its demand tends to be more elastic.
This means that consumers are more likely to switch to these substitutes if the price of the original
product changes. In other words, a small price increase for a product with many substitutes could lead to
a large decrease in its quantity demanded, as consumers opt for the cheaper alternatives.

15. Habits
Habits can have an impact on the elasticity of demand for a product. When consumers have strong
habits or established routines related to a particular product, the demand for that product tends to be less
elastic

16. Time period
the time period under consideration affects how elastic or inelastic demand is. Short-run demand tends to
be less elastic, while medium-run and long-run demand become progressively more elastic as
consumers have the time and opportunity to make adjustments to their consumption choices.

17. Methods of Measuring Price Elasticity
of demand
There are three main method:
1) Ratio or percentage method
2) Total outlay or expenditure method
3) Geometry or point method

18. Importance of Elasticity of Demand for
Government
Price Controls
When the government fixes a
price ceiling or floor, it can
lead to either excess quantity
demanded or supplied, which
affects the elasticity of
demand for those products.
Taxation Policy
The elasticity of demand
determines the impact of
taxes on revenue. When the
demand is elastic, taxes
impact consumers more than
when the demand is inelastic.
Income
Distribution
Understanding income
elasticity of demand helps in
assessing how a specific tax
or subsidy policy that affects
household incomes impacts
the demand for different
products.

19. Conclusion
Elasticity of demand is a crucial concept in economics that helps
businesses and governments make informed decisions. We hope this
presentation has provided you with a better understanding of how it works
and how it affects different aspects of the market.

20. Thank You

21. The End