Price Elasticity of Demand, Types and Factors affecting price elasticity

1. DEMAND FUNCTIONS
Dr. NGPASC
COIMBATORE | INDIA
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with 'A' Grade (2nd Cycle)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100
RAJAKRISHNAN M
Assistant Professor in Commerce CA

2. Dr. NGPASC
COIMBATORE | INDIA
ELASTICITY
Elasticity Of
Demand =
percentage change in
quantity demandedpercentage change in
determinant of demand
Concepts Of Elasticity Of Demand

3. Dr. NGPASC
COIMBATORE | INDIA
TYPES OF ELASTICITY OF DEMAND

4. Dr. NGPASC
COIMBATORE | INDIA
PRICE ELASTICITY OF DEMAND
The price elasticity of Demand may be defined as the ratio of the
relative change in demand and price variables.
e = percentage/proportional change in
quantity demanded
percentage/proportional change in
price

5. Dr. NGPASC
COIMBATORE | INDIA
TYPES OF PRICE ELASTICITY

6. Dr. NGPASC
COIMBATORE | INDIA
Perfectly Elastic Demand

7. Dr. NGPASC
COIMBATORE | INDIA
Perfectly Inelastic Demand

8. Dr. NGPASC
COIMBATORE | INDIA
Relatively Elastic Demand

9. Dr. NGPASC
COIMBATORE | INDIA
Relatively Inelastic Demand

10. Dr. NGPASC
COIMBATORE | INDIA
Unitary Elastic Demand

11. Dr. NGPASC
COIMBATORE | INDIA
Price Elasticity of Demand

12. Dr. NGPASC
COIMBATORE | INDIA
Factors Affecting Price Elasticity Of Demand
• Nature of the
Commodity
• Availability of
Substitutes
• Variety of uses
of commodity
• Postponement
• Influence of
habits
• Proportion of
Income spent on
a commodity
• Range of
prices
• Income Groups
• Elements of
time
• Pattern of
income
distribution

13. Dr. NGPASC
COIMBATORE | INDIA
Practical Importance of the Concept of Price Elasticity Of Demand
The concept is
helpful in taking
Business
Decisions
Importance of
the concept in
formatting Tax
Policy of the
government
For determining
the rewards of
the Factors of
Production
To determine
the Terms of
Trades Between
the Two
Countries
Determination
of Rates of
Foreign
Exchange for
Nationalization
of Certain
Industries
In economic
Analysis ,the
concept of price
elasticity of
demand helps in
explaining the
irony of poverty
in the midst of
plenty.

14. 14