Speculative analysis on Elasticity of Demand and its determinants

The law of demand state that fall in the price of a good raise the quantity demanded. The price elasticity of demand measures how much the quantity demanded responds to change in price. Demand for a good is said to be elastic if the quantity demanded response substantially to changes in the price. Demand is said to be inelastic if the quantity demand response only slightly changes in the price.

There are 5 types of elasticity of demand-

1) Perfectly elastic demand

2) perfectly inelastic demand

3)Relatively elastic demand

4)Relatively inelastic demand

5)Unitary elastic demand

Determinants of Elasticity-

•Supply

1)Flexibility of input
2)Mobility of input
3)Durability
4)Time
5)Ability to produce
6)Substitute input

•Demand

1) Price of own good
2) Price of substitute
3) Income of consumers
4) Advertising promotional
5) Measures

A)Price Elasticity of Demand (Ped)-     

The price elasticity of demand in general terms is how it is measured. Economists compute the price elasticity of demand as a percentage change in the quantity demanded divided by the percentage change in the price. That is,       

=Percentage change in quantity demanded / percentage change in price

B)Income Elasticity of Demand-

Income elasticity of demand measures how the quantity demanded changes as consumer income changes. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. That is,

Income elasticity of demand-

=Percentage change in quantity demanded / percentage change in income