Elasticity is the measure of change in buyer and seller's response with market conditions, i.e. it measures the change in behavior of buyers and sellers when there is a change in the market regarding a particular product.
The measure of change in quantity of demand with change in price is called price elasticity of demand.
Demand of goods can be classified as follows
Elastic
When the quantity demanded responds to the change in price substantially, the good is said to be elastic in nature. Other than this, when the quantity and price of a good move proportionally, the good is said to be elastic demand.
Inelastic
When the quantity demanded responds to slight changes in price only, the good is said to be inelastic in nature. Other than this, when quantity moves proportionately less than the price, the good is said to be inelastic demand.
Unitary elasticity
When the quantity increases or decreases with increase or decrease of the quantity demanded, the good is said to have unitary elastic demand.
The price elasticity of demand is influenced by some factors like the substitutes, necessities, etc.
Substitutes
Lets take an example of curd and yogurt. If a person is habitual of having curd but its prices go up, he will immediately move to yogurt. As yogurt is a good substitute to curd the budget will not be effected. Thus, curd is an elastic demand good.
Necessities
A household works with necessities and requirements. The essentials are to be spent on first and then the extras are taken care of. Thus, if a product is a necessity, it is inelastic demand.
The measure of change in quantity of demand with change in price is called price elasticity of demand.
Demand of goods can be classified as follows
Elastic
When the quantity demanded responds to the change in price substantially, the good is said to be elastic in nature. Other than this, when the quantity and price of a good move proportionally, the good is said to be elastic demand.
Inelastic
When the quantity demanded responds to slight changes in price only, the good is said to be inelastic in nature. Other than this, when quantity moves proportionately less than the price, the good is said to be inelastic demand.
Unitary elasticity
When the quantity increases or decreases with increase or decrease of the quantity demanded, the good is said to have unitary elastic demand.
The price elasticity of demand is influenced by some factors like the substitutes, necessities, etc.
Substitutes
Lets take an example of curd and yogurt. If a person is habitual of having curd but its prices go up, he will immediately move to yogurt. As yogurt is a good substitute to curd the budget will not be effected. Thus, curd is an elastic demand good.
Necessities
A household works with necessities and requirements. The essentials are to be spent on first and then the extras are taken care of. Thus, if a product is a necessity, it is inelastic demand.
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