Elasticity In Brief

What is Elasticity?

An Elasticity of demand is a measure of the sensitivity of one variable(i.e, Quantity demanded) to another(i.e, Price or Consumer Income). Percentage change that will occur in one variable in response to a percentage change in another variables.

Different types of Elasticity of Demand:

•         Price Elasticity of Demand: Degree of responsiveness of a change in quantity demanded due to change in change in price. This is known as Price elasticity of Demand. Price Elasticity of Demand can be further divided into five types- Perfectly Elastic Demand, Perfectly Inelastic Demand, Relative Elastic Demand, Relative Inelastic Demand and Unitary Elastic Demand.

                                          

• Income Elasticity of Demand: Degree of responsiveness of a change in quantity demanded due to change in Income of the consumer. If Income Elasticity of demand is more than 1 than it will indicate that change in Income will have effect in change in quantity demanded that to in the same direction.

        

•        Cross Elasticity of Demand: Degree of responsiveness of change in quantity demanded of one commodity due to change in price of another commodity. This elasticity happens mainly between complementary or substitute commodity.