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  1. 1. What is Demand ? Demand is an economic principle that describes a consumer’s desire backed by the purchasing power and willingness to pay a price for a specific good or service. Demand refers to how much (quantity) of a product or service is desired by buyers.
  2. 2. What is Elasticity of Demand ?Elasticity of Demand refers to the degree of responsiveness of quantity demanded to the changes in the determinants of demand . 
There are mainly 3 quantifiable determinants of demand:- Price of the Good Income of the Consumer Price of the Related Goods
  3. 3. Types of Elasticity Of DemandThere are three quantifiable determinants of demand, Hence elasticity of demand can be of three types Price Elasticity of Demand Income Elasticity of Demand Cross Elasticity of Demand
  4. 4. Price Elasticity of Demand Price Elasticity of demand is the degree of responsiveness of demand to a change in its price . In technical terms it is the ratio of the percentage change in demand to the percentage change in price. Thus, 
Ep =Percentage change in quantity demanded/Percentage change in price
  5. 5. Income Elasticity Of Demand Income Elasticity of Demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good It is calculated as the ratio of the percentage change in demand to the percentage change in income.
  6. 6. Cross Elasticity Of Demand The Cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good.
  7. 7. Measurement of Elasticity of Demand Percentage Method . Point Elasticity Method. Total Outlay Method. Arc Elasticity.
  8. 8. What is Supply? Supply is the quantity of some product producers are willing to offer and are able to sell at a given price at a given period all other factors being held constant. Usually, supply is plotted as a supply curve showing the relationship of price to the amount of product businesses are willing to sell.
  9. 9. What is Elasticity of Supply? Responsiveness of producers to changes in the price of their goods or services. As a general rule, if prices rise so does the supply. Elasticity of supply is measured as the ratio of proportionate change in the quantity supplied to the proportionate change in price. High elasticity indicates the supply is sensitive to changes in prices, low elasticity indicates little sensitivity to price changes, and no elasticity means no relationship with price. Also called price elasticity of supply.
  10. 10. Types Of Elasticity of Supply Perfectly Elastic Supply Perfectly Inelastic Supply Relatively Elastic Supply Relatively Inelastic Supply Unitary Elastic Supply
  11. 11. Perfectly Elastic Supply It is a case where a very slight change in price causes an Infinite change in supply. A slight fall in prices brings quantity supplied to zero. In such a case the supply curve runs parallel to X -axis. The supply curve takes the shape of a horizontal straight lit line
  12. 12. Perfectly Inelastic Supply The supply of a commodity is said to be perfectly inelastic when the supply of commodity is completely non-responsive to changes in price. It is a case where quantity supplied remains the same despite the change in price. A perfectly inelastic supply curve is a vertical straight line which is parallel to OY-axis.
  13. 13. Relatively Elastic Supply The supply is relatively elastic when a given change in price produces more than proportionate change in quantity supplied. A doubling in price will result in more than double the quantity supplied.
  14. 14. Relatively Inelastic Supply When a certain change in price causes a smaller proportionate change in quantity supplied of a Commodity, the supply is said to be relatively less elastic. The percentage change in price is more than the percentage change in quantity supplied.
  15. 15. Unitary Elastic Supply A unitary-elastic supply indicates a good with a supply-price elasticity of one. Which means that a 1% change in price increases supply by 1%.