Elasticity of demand

The law of demand (price & demand are

inversely correlated) represent only a
qualitative statement, while the
elasticity of demand represent a
“quantitative statement” this concept
indicate the degree of responsiveness of
quantity demanded to changes in
market price. Thus “the elasticity of
demand is a measure of the relative”
change in quantity demanded in
response to a relative change in price
on a given demand curve
 Classification of elasticity of
demand
 Price elasticity of demand
 Cross elasticity of demand
 Income elasticity of demand
 Price elasticity of demand
 The price elasticity of demand
measure the responsiveness in the
quantity demanded of a commodity
change in its price
Types of price elasticity of demand
 Perfectly elastic demand
elasticity is infinite when some
“small price reduction raise the
demand zero to infinity” in such case
demand is said to be perfectly
elastic.
 Perfectly inelastic demand

The quantity demanded does not

change by the price affect.
 Relatively elastic demand
 Qty. demanded change by a larger %
than does price means .if price
reduce by 10% demand will effect
more than 10% and vica versa .
 Relatively inelastic demand
 Qty. demanded change by a smaller
% than does price.
 Unitary elastic demand
 Qty. demanded change by exactly
the same % as does price