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# Elasticity of demand(2003)

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elasticity of demand

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### Elasticity of demand(2003)

1. 1. Elasticity of Demand<br />The price elasticity of demand measures the relative change in quantity demanded of a commodity in response to a relative change in its price<br />10/4/2010<br />1<br />CHARU NAGPAL<br />
2. 2. Degrees of elasticity of<br />demand<br />Perfectly elastic demand<br />Highly elastic demand<br />Unitary elastic demand<br />Highly inelastic demand<br />Perfectly inelastic demand<br />10/4/2010<br />2<br />CHARU NAGPAL<br />
3. 3. Perfectly elastic demand<br /><ul><li>When price remains same
4. 4. Quantity demanded changes</li></ul>Highly elastic demand<br />When change in demand is much more than change in price<br />10/4/2010<br />3<br />CHARU NAGPAL<br />
5. 5. Unitary elastic demand<br />Change in demand = change in price<br />Highly inelastic demand<br />When change in price is more than the change in quantity demanded<br />10/4/2010<br />4<br />CHARU NAGPAL<br />
6. 6. Perfectly inelastic demand<br />When change in demand does not change with change in price<br />10/4/2010<br />5<br />CHARU NAGPAL<br />
7. 7. Methods of calculating elasticity of demand<br />Percentage method<br />Total outlay method<br />Arc method<br />Point method<br />10/4/2010<br />6<br />CHARU NAGPAL<br />
8. 8. Types of elasticity of demand<br />Price elasticity of demand<br />Income elasticity of demand<br />Cross elasticity of demand<br />10/4/2010<br />7<br />CHARU NAGPAL<br />
9. 9. Determinants of elasticity of demand<br />10/4/2010<br />8<br />CHARU NAGPAL<br />
10. 10. 1. Time element<br />Demand is inelastic in short period but elastic in long period. It is because in the long run, a consumer can change his habits more conveniently than in the short run<br />10/4/2010<br />9<br />CHARU NAGPAL<br />
11. 11. 2. Nature of Commodity<br />Necessaries like salt, match box etc… have inelastic demand <br />Luxuries like ac, furniture, fashionable clothes, have highly elastic demand<br />10/4/2010<br />10<br />CHARU NAGPAL<br />
12. 12. 3. Availability of Substitutes<br />Demand for those commodities which have substitutes are relatively more elastic because when the price of commodity falls in relation to its substitute, the consumer will go in for it and so its demand will increase<br />10/4/2010<br />11<br />CHARU NAGPAL<br />
13. 13. Price level<br /> Income of consumer <br />Habit of consumer <br />Postponement of use<br />Different uses of commodity<br />10/4/2010<br />12<br />CHARU NAGPAL<br />