Elasticity Of Demand

Let Understand,Demand 1st

Customer's desire, will and ability to pay for purchase goods at various price.

Elasticity of demand

An elasticity is measure of sensitivity of a one variables to another. Which mean percentage(%) change in response to percentage(%) change in another variables.

Types of elasticity of demand.

1. Price elastic of demand.
2. Income elastic of demand.
3. Cross elastic of demand.

1> Price elastic of demand-- Price elastic of demand donates the ratio of percentage change in the demand for a product to a percentage change in it's price. The price elastic of demand can be expressed by the following formulas:-

→Ep= Percentage change in quantity demand/Percentage change in price

So now,

Percentage change in quantity demand =

New quantity demand(^Q)/Original quantity demand(Q)

Again Percentage change in price = New price(^P)/Original price(P)

→According to the Marshal there are five types of price elasticity.

A→Perfectly elastic of demand.
B→Perfectly inelastic of demand.
C→Relatively elastic of demand.
D→Relatively inelastic of demand.
E→Unitary elastic of demand.

2> Income elastic of demand-- Income elastic of demand mean the ratio of the percentage(%) change in the quantity demand to the percentage(%) in income.

Ey = Percentage change on quantity demand/Percentage change in income

So now,
Percentage change in quantity demand(^Q) = New quantity demand/Original quantity demand(Q)

→Types of income electricity of demand.

A→ Postive income elastic of demand.
B→ Negative income elastic of demand.
C→ Zero income elastic of demand.

3> Cross elasticity of demand-- Cross elasticity of demand measures the respective of quantity demand for a Good with respect to change in price of it's substitute or complementary goods.

→Types of cross elasticity of demand

A→ Positive cross elasticity of demand.
B→ Negative cross elasticity of demand.
C→ Zero cross elasticity of demand.