Measurement of elasticity of Demand for Tea and Sugar.

1. WELCOME TO OUR
PRESENTATION
Measurement of
elasticity of
Demand for Tea
and Sugar.
INTERNATINAL UNIVERSITY OF
BUSINESS AGRICULTURE AND
TECHNOLOGY
Course number : ECO-101
Prepared for :
Faculty, Department of Economics
Sec :
Program : BBA

2. CONTENT
Serial No. Chapter Title. Page No.
01 Introduction 4
02 Analysis Objective 5
03 Methodology 6
04 Demand 7
05 Elasticity of Demand 8
06 Types of Elasticity of
Demand
9
07 Data (For Tea) 10
08 Actual Estimate and
Result
11 & 12
09 Data (For Sugar) 13
10 Actual Estimate and
Result
14 & 15
11 Product Result 16
12 Conclusion 17
2

3. Introduction
• Bangladesh is a small tea producing country with large potential. Tea is a major
agrobased,labour intensive and export-oriented industry of Bangladesh. It plays a
very vital role in the national economy through export earning, trade balancing and
as well as in employment generation. It produces 2% of world production and
exports 3% of world export. It gives 200 million taka as interest against production
and development loan from the tea industry (BTB, 2018). Tea is a very important
cash crop of Bangladesh. A large number of tea estates have been established in
Bangladesh depending on the tea as raw material. But processing and marketing
system of tea are* subdued by manifold problems , which always hamper the
interest of tea producers. A wide range of variations was observed in yield, costs
and returns among.
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4. Analysis Objective
There are some important objectives for this research.The main objectives of the
present study are given below :
1.To measure the elasticity of demand.
2.To investigate the responsive of quantity demanded of price.
3.To compare elasticity of demand between tea and sugar.
4

5. Methodology
• In order to turn imply and demand into a truly useful tools .we need to know how
much supply and demand responds to the change in price .some purchase like those
for vacation travel are very sensitive to prices changes other likes drink or
electricity are necessities for which consumer purchase respond very little to price
changes. The quantitative relationship between price quantity purchased analyzed
using the crucial concept of elasticity.
5

6. Demand
•By demand we means we demand the various quantities of a given commodity of
services with consumers would be in one market in a given period of time at various
prices at various incomes or at various prices of relies goods. Of demand the amount of
if that a consumer will purchase or will be ready to take off from the market various
given price in a given period time.
•The demand in economics implies both the desires of purchase and the ability to pay
for it.
6

7. Elasticity of Demand
• The Elasticity of Demand is a measure of change in the quantity demanded in
response to the change in the price of the commodity. Simply, the effect of a
change of price on the quantity demanded is called as the elasticity of demand.
• Marshall, a renowned economist, has suggested a mathematical method to measure
the elasticity of demand:
• According to this formula, the elasticity of demand can be defined as a percentage
change in demand as a result of the percentage change in price. Numerically, it can
be written as:
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8. Types of Elasticity of Demand
• The elasticity of demand measures the relative change in the total amount of goods or services that
are demanded by the market or by an individual. The quantity demanded depends on several factors.
Some of the more important factors are the price of the good or service, the price of other goods and
services, the income of the population or person and the preferences of the consumers. So, we have
several types of elasticity of demand according to the source of the change in the demand. For
example, if the price is the source of the change, we have the “price elasticity of demand”.
• According to the source of the change, the following types of elasticity of demand can
be mentioned:
1. Price Elasticity of Demand
2. Cross Elasticity of Demand (the elasticity in relation to the change of the price of other good
and services)
3. Income Elasticity of Demand
4. Advertisement Elasticity of Demand (the elasticity in relation to the advertisement expenditure)
• According to the degree of the change in the demand, the elasticity can be classified in:
1. Perfectly Elastic
2. Relatively Elastic
3. Unit Elasticity
4. Relatively Inelastic
5. Perfect Inelastic 8

9. Data
300
230
P
Q
2018 (May)
2016 (May)
Price
350 400
Quantity Demand
For Tea
For calculating the price elasticity of demand , we need some data on price quantity .So , we went to
a nearest shop and they provide us some data on quantity of demand and price of tea and sugar .We
get data from a nearest shop in uttara .That’s why we get the fresh data the details are given below :
Year Price (Tea) Quantity(per
day)
2016 (May) 230 400
2018 (May) 300 350
Demand schedule for Tea :
According to this data we get
the following diagram :
9

10. Actual Estimate and Result
• For tea we get the following data
P1 =230 (previous price,2016)
P2 =300 (current price,2018)
Q1 =400 (previous quantity,2016)
Q2=350 (current quantity,2018)
∆P =p2-p1
=300-230
=70
∆Q= Q2-Q1
=350-400
= -50 [ The change in demand shows a negative sign,which can be ignored.]
P = p1+p2
2
= 230+300
2
= 265
10

11. Actual Estimate and Result
Q = Q1+Q2
2
= 400+350
2
= 375
= 50 × 265
70 375
= 0.5047619048
The price of elasticity demand is less then 1. So it has inelastic demand . We can avoid (-0 sign)
because all elasticity are positive . After calculating the elasticity of tea we see that it has inelastic
demand.
11

12. Data
P
Q
2018 (May)
2016 (May)
65
48
30 40
Quantity Demand
Price
For Sugar
•In 2016(May) and the present condition in 2018(May).In the year 2016(May) the price was 48 tk
per kg and now in this year 2018(May) the price is 65 tk per kg.The quantity of selling was 400 kg
per day in the year of 2016 and now due to increase of price the quantity of selling has 300 kg per
day of this shop.
Year Price Tk Quantity(Per
Day)
2016 48 40
2018 65 30
Demand schedule for Sugar :
According to this data we get
the following diagram :
12

13. Actual Estimate and Result
• For sugar we get the following data :
P1 =48 (previous price,2016)
P2 =65 (current price,2018)
Q1 =40 (previous quantity,2016)
Q2=30 (current quantity,2018)
∆P = p2-p1
= 65-48
= 17
∆Q= Q2-Q1
= 30-40
= -10 [ The change in demand shows a negative sign,which can be ignored.]
P = p1+p2
2
= 48+65
2
= 56.5 13

14. Actual Estimate and Result
Q = Q1+Q2
2
= 40+30
2
= 35
= 10 × 56.5
17 35
= 0.9495798319
• The price of elasticity demand is less then 1. So it has inelastic demand .We can
avoid (-0 sign)because all elasticity are positive . After calculating the elasticity of
sugar we see that it has inelastic demand.
14

15. Sugar Product Result
• After calculating Sugar details the result shows that the elasticity of demand of pointed is
almost same as ready. In this case we have found elastic demand.
15

16. Conclusion
• At last , we can say that Sugar shows comparatively more elastic demand thanTea.
16

17. Reference
• Samuelson A. Paul and Nordhus D. William, Economics, nineteen edition,
published by McGRAW-HILL
• Local shop in Uttara.
17

18. The End
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