This document discusses the concept of elasticity of demand. It defines demand and its key elements. It explains the difference between the direction of change in demand versus the rate of change, which is measured by elasticity. There are different types of elasticity including price, income, and cross elasticity. The document discusses methods to measure price elasticity and provides examples of goods with relatively elastic versus inelastic demand. It also outlines factors that affect the price elasticity of a good like its nature, availability of substitutes, and proportion of income spent.

1. ELASTICITY OF DEMAND
By
Dr. Raksha Singh
Principal
Shri Shankaracharya Mahavidyalaya
rakshasingh20@hotmail.com
www.ssmv.ac.in
DR RAKSHA SINGH

2. DEMAND
 According to Ronald F.Ferguson
Demand refers to the quantities of commodity that
consumers are able and willing to buy at each possible
price during a given period of time, other things being
equal.
 Three important elements of demand for a
commodity
1.Desire for a commodity
2.Money to fulfil that desire
3.Readiness to spend money
DR RAKSHA SINGH

3. DIFFERENCE
 Direction of Change
 Law of Demand explains
‘direction of change’in the
quantity demanded
1. Shift in demand curve when
demand changes due to other
determinants not price
2.Movement along the curve-
when only demand changes
due to its price
 Rate of Change
 Elasticity of demand measures rate
of change or degree of change
 Edx measures rate of change in th
quantity demanded to a given
change in any of the determinants
of demand such as
 1. Price of the commodity,
 2. Prices of related goods,
 3. Money income of the consumer,
 4.Advertisement,
 5.Tastes etc
DR RAKSHA SINGA

4. TYPES OF ELASTICITY
 Three Types of Elasticity
1. Price Elasticity of Demand
2. Income Elasticity of Demand
3. Cross Elasticity of Demand
4. Advertising Elasticity
DR RAKSHA SINGH

5. ELASTICITY
म ांग की लोच
 In economics, elasticity is the measurement of how an
economic variable responds to a change in another. It gives
answers to questions such as:
 "If I lower the price of a product, how much more will
sell?"
 "If I raise the price of one good, how will that affect sales
of this good and other good?"
 "If the market price of a product goes down, how much will
that affect the amount that firms will be willing to supply
to the market?"
DR RAKSHA SINGH

6. ELASTICITY
 The elasticity (or responsiveness) of demand in a market is
great or small according as the amount demanded increases
much or little for a given fall in price, and diminishes much
or little for a given rise in price”. – Dr. Marshall.
 How to calculate price elasticity of demand.
Percentage change in Quantity
Percentage change in price
DR RAKSHA SINGH
Ed=▲Q/▲P *P/Q
Ed=

7. METHODS OF MEASUREMENT
 Mostly three methods of measurement of
Price Elasticity
 Proportionate or Percentage Method
 Total Expenditure or Outlay Method
 Point Method or Geometrical or Graphical Method
 Fourth Method
 Arc Method
DR RAKSHA SINGH

8. PROPORTIONATE/PERCENTAGE
METHOD
Price of
Chocalate
Quantity
20 100
25 90
DR RAKSHA SINGH
Question
Solution
P= 20 Q= 100
P1=25 Q1=90 ▲P= P1-P = 25-20= 5
▲Q= Q1-Q = 90-100= -10
( Inversely related negative sign will be ignored)
10/5* 20/100 = 0.4 = Ed less than one
Relatively Inelastic
Ed=▲Q/▲P *P/Q

9. FIVE DEGREES/CASES OF PRICE ELASTICITY
म ांग की कीमत लोच की श्रेणिय ां
DR RAKSHA SINGH

10. PRICE ELASTICITY
DR RAKSHA SINGH
If the quantity demanded of a product exhibits a large change
in response to its price change, it is termed "elastic," that
is, quantity stretched far from its prior point.
If the quantity purchased has a small change in response to
its price, it is termed "inelastic"; quantity didn't stretch much
from its prior point.

11. PRICE ELASTICITY…
DR RAKSHA SINGH
Unit Elastic- When percentage change in price is
equal to quantity demanded

12. DR RAKSHA SINGH
Relatively Elastic Relatively Inelastic
PRICE ELASTICITY…

13. ELASTICITY
 Petrol
 few alternatives
 weak substitutes, such as train, walking and the bus.
 if the price of petrol goes up, demand proves very
inelastic.
Petrol Station. We say that petrol is overall inelastic. But, if
an individual petrol station increases price, people will buy
from other petrol stations. The only exception is if a petrol
station has a local monopoly – e.g. at service station on the
motorway there is a captive audience. But, in a city centre
with many alternatives, people will have an elastic
demand. All depends upon situation..

14. Examples of relatively elastic or inelastic
 A good produced by a monopoly. Any good produced
by a monopoly is likely to be inelastic demand. For
example, if Sky (Telecast) increase the cost of
premiership pay per view, many football fans will pay
the extra price. Though because it isn’t a necessity,
demand may be less inelastic than say petrol.
 Now Hotstar,Netflix,….

15. Examples
 Peak rail tickets. For commuters who rely on the train
to get to work in Bilaspur, demand will be very
inelastic. If price of fares from Durg to Bilaspur
increase, demand will only fall by a small amount.
 The alternatives for commuting into Bilaspur, such as
driving are limited.
 Situation will be different if Metro will start, Luxury Buses
are available at Convenient price

16. FACTORS AFFECTING PRICE ELASTICITY
OF DEMAND
 1. Nature of the commodity
 Elasticity differs as per the nature of the commodity
necessary goods, comforts, luxury
 Conventional necessary goods-generally Less inelastic
 Commodities required at the time of birth, marriage or death
ceremonies
 Comforts- Bread ,Egg,butter Moderately elastic
 Luxury- More Elastic
 2. Substitutes
 Demand for Substitutes – More elastic
 Goods with no close substitutes- Inelastic

17. FACTORS AFFECTING PRICE ELASTICITY …
 3.Variety of uses
 Commodity having composite demand-More Elastic e.g
Milk, steel ,electricity..
 4.Joint Demand
 Certain commodities which are jointly demanded Jeep
– Petrol, Pen –Ink. The elasticity of second commodity
depends upon the elasticity of the major commodity
 5. Habits
 People who are habituated to the consumption of a
particular commodity like soup,coffee of particular
brand –Demand will be Elastic

18. FACTORS AFFECTING PRICE ELASTICITY …
 6.Income Groups
 Person who belongs to higher Income groups-Less
Elastic. Lower income group – More Elastic
 7.Propotion of Income Spent
 If Consumer spends a small proportion of his income on
a commodity at a time- demand will be less elastic he
will not bothered about his small expenditure

19. Example of price inelastic
demand
 Salt.
 If the price of salt increased, demand would largely
be unchanged.
 It is only a small % of income and people tend to
buy infrequently.
 Good with no real substitutes at all.

20. Examples
 Apple iPhones, iPads. The Apple brand is so strong
that many consumers will pay a premium for apple
products. If the price rises for apple iPhone, many will
continue to buy. If it was a less well known brand like
Dell computers, you would expect demand to be price
elastic.

21. WORDS IN HINDI
 Elasticity म ांग की लोच
 Rate of Change परिवततन की दि.
 Price Elasticity म ांग की लोच की कीमत
 Income Elasticity म ांग की आय लोच
 Cross Elasticity प ि लोच
 Inelastic आलचकद ि
 Elastic लोचद ि
 Unit Elastic एक त्म लोचद ि म ांग
 Relatively Elastic demand स पेक्षत लोचद ि म ांग,
 Degrees of price elasticity म ांग की कीमत लोच की
श्रेणिय ां Dr. Raksha Singh

22. References
 (2020, Jan). Retrieved from
https//www.canstockphoto.com
 https//www.canstockphoto.com. (2019, Dec).
Retrieved from https//www.canstockphoto.com
 https://www.pixabay.com. (2019, Nov). Retrieved
from https://www.pixabay.com
 https://www.shutterstock.com. (2019, March).
Retrieved from https://www.shutterstock.com
 I.C. Dingra, V. (1997). Economics. Sultan Chand&
Sons.
 Kar.lE.case, R. C. (2018). Principles of Economics.
Pearson.
DR RAKSHA SINGH

23. DR RAKSHA SINGH
THANK YOU