Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
ELASTICITY OF DEMAND
Prepared By
Vyas Harshal
C
E
When the demand for a product changes increases or decreases even when there is no change in price, it is known as perfect elastic x demand.
demand
When the proportionate change in demand is more than the proportionate changes in price, it is known as relatively elastic demand.
D
0 x
demand
D
P R
I
C E
When the proportionate change in demand is less than the proportionate changes in price, it is known as relatively inelastic demand
D
O X demand
P R
I
C E
When a change in price, howsover Perfectly inelastic large, change no demand curve changes in quality demand, it is known as perfectly inelastic demand
D demand
P R D
I
C E D4 0 D5 DEMAND X D3
D1
D2
WHERE D1) Perfectly elastic demand D2)Relatively elastic demand D3)Elasticity of demand equal to utility D4)Relatively inelastic demand D5)Perfectly inelastic demand
Price elasticity
Elasticity of demand is greater than 1(e>1) Elasticity of demand is less than 1(e<1) Elasticity of demand is equal than 1(e=1)
P
R I C p3
E=1
p2 p1
E<1
Q1
Q2
Q3
Total outlay
e=1
e<1
e=0 0 a
P A Income D
B S Quantity Demanded
Total Revenue
B S
Income
O
D Quantity Demanded
E
Income C B A D
Quantity Demanded
y Y
= (5/20) + (500/2500) = 1.5 therefore here the IED is 1.5 which is more than one.
Elasticity Of Substitution
Elasticity of Substitution = Proportionate change in the quantity ratios of goods x & y DIVIDED BY Proportionate change in the price ratios of goods x & y.
E3
E5
i.e.
Py
Price of Y
D O X
Demand for Y
Price of Y
D O Demand for Y X
Demand for Y
i.e.
qx
Advertising Expenditure
******THE END******