class 11 economics

Elasticity of demand

Wednesday, March 24, 2021 10:12 PM

Elasticity of demand : elasticity of demand is defined as the proportionate(percentage) change in quantity divided by the
proportionate change in its determinates like price , income , price of related goods etc.

There are various types of elasticity of demand as its determinants. However there are three types
of demand as they are main determinants of demand whose change is visible and measurable .
They are

1) Price elasticity of demand
2) income elasticity of demand
3) Cross elasticity of demand

What is price elasticity of demand ? Explain its types.

In general elasticity of demand means price elasticity of demand . It is defined as percentage
change in quantity demanded for a product divided by the percentage change in its price other
thing remaining same, it is denoted by and written as

Where Q=Quantity demand
P= price

The terms other things refers to the income of consumer price of related goods tase and
preference of the consumes etc. . The value of price elasticity of demand remain always
negative because of the negatives slope of demand curve.
Numerical example
Price quantity demand
20 4
25 2

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It shows that 1% increase in price causes 2% decrease in quantity
Types of elasticity of demand

The price elasticity of demand can be classified into five different types on the basis of

their degree.

1) Perfectively elastic demand (

Demand is said to be perfectively elastic if a negligible change in price will lead to infinite

( huge ) change in quantity demand . I.e. what ever be .This types of demand can

rearely be found in the real life

price

quantity demand

Figure : perfectively elastic demand
DD is the perfectly elastic demand curve which is parallel to the X-axis

2) Perfectively inelastic demand (

Demand said to be perfectly inelastic if the demand remains unchanged whatever be

the change in price. ie It is applied in basic necessary goods like salt , genera

medicine.

price

quantity demand
Figure : perfectively elastic demand
DD is the perfectly elastic demand curve which is parallel to the y-axis

3) Unitary elastic demand ( the demand of a acommodity is said to be

unatary elastic if the percentage change in demand is equal to the percentage change

change in price ie

price

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price

quantity demand
Quantity of demand
Fig :- unitary elastic demand
DD is the unitary elastic demand curve .As price fall by 20 % ie P to p1 quantity of
demand also rise by 20% ie Q to Q1
4) Relatively elastic demand : Demand for a commodity is said to be relatively elastic if the
percentage change in quantity demanded is relatively greater than percentage in price ie

It can be further explained by following figure.

price

Quantity demand
Fig : relatively elastic demand
DD is the relatively elastic demand curve . It is more flat with greater slope . Quantity of
demand is increase by 20% where as the price is decrease by 10%

5) Relatively inelastic demand Demand of commodity is said to be relatively inelastic if

the percentage change in quantity demanded is relatively less than percentage change price

i.e.

It can be further explained with the help of following figure

price

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Quantity demand

Fig : relatively inelastic demand

In the figure DD is the demand curve . It is more steeper with less slope . .As price fall by 40 % i.e P
to p1 quantity of demand also rise by 20% i.e. Q to Q1

what is income elastic of demand ? explain its types .
Income elasticity of demand :- the elasticity of demand is the measure or responsiveness of
quantity demand of a product or services to the change in income of a consumer , other thigs
remaining same .

Where Q= quantity demand,

Y=initial income

the income elasticity of demand is unit free measurement. The value of it may be positive

negative or zero depending on the nature of goods

Types of income elasticity of demand based on the value , income elasticity of demand are

classified into three categories

a. Positive income elasticity of demand ( : if percentage change in quantity demand of

a goods is positive in response to change in income of the buyers then the income elasticty

of demand is known as positive inceome esaticity of demand .

price

Quantity of demand

fig: positive income elasticity of demand
DD is the income demand curve. The positively sloped demand curve shows the positive
relationship between income and demand There are three types of income elasticity of
demand .

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demand .
They are income elasticity greater than one(

b) Negative income elasticity of demand:=If the quantity demand varies inversely with
income then it is called negatively income elasticity of demand . This type of elasticity can
be found in cause of inferior goods

income

quantity of demand

fig negative income elasticity of demand .
In the figure DD is the income demand curve. The negatively sloped demand curve shows
the inverse relation between the income and quantity of demand . As the income decrease
from Y to y1 then quantity of demands decrease from Q to Q1
c) Zero income elasticity of demand :- if the quantity demanded for a goods of consumer
does not change with change in income , then it is called zero income elasticity of
demand .such types of income elasticity can be found in basic goods like salt ,water.
General medicine.

fig : Zero income elasticity of income
the vertical straight line Dx is a zero income elasticity demand curve.

What is cross elasticity of demand ?Discuss the positive and negative cross elasticity of
demand .
Cross elasticity of demand :- price of other related goods is another most important determinant
of demand for goods The measures of responsiveness of quantity demand of good X to the

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of demand for goods The measures of responsiveness of quantity demand of good X to the
change in price of good Y is known as cross elasticity of demand It is symbolized by the letter

it is unit free measurement.
Types of cross elasticity
1. Negative cross elasticity of demand : if there is inverse relationship between percentage

change in quantity of good X and percentage change in price of good y then it is known as
negative cross elasticity of demand. Negative cross elasticity of demand can be found in
complementary goods . It can be explain with the help of following figure

Price of Y(bike)

quantity demanded of X( petrol)
Fig: -Negative cross elasticity of demand
in the figure quantity of demand is measured along the x-axis and price of Y is measured
along the Y axis . DD is a demand curve. P1 is the initial price and Q1 is the corresponding
quantity . When price increase from P to P1 quantity of demand decrease from Q to Q1.It
shows the negative cross elasticity of demand
2) Positive cress elasticity of demand : if there is positive relationship between percentage
change in quantity of good X and percentage change in price of good y then it is known as
positive cross elasticity of demand. Positive cross elasticity of demand can be found in
substitute goods it can be explain with the help of following figure

price of Y( coke)

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quantity of X ( Pepsi)

Fig := positive cross elasticity of demand
In the figure quantity is measured along price is measured along . DD is the demand
curve . When price increase from P to P1 quantity also increase from Q to Q1 . It shows the
positive
relationship between

What are the different types of price elasticity?

Meaning of elasticity supply
Elasticity of supply is defined as the percentage change in quantity supplied due to certain
percentage change in price , other things remaining the same.
Symbolically ,
Where PES= price elasticity of supply

P & QS are initial price and quantity supplied
There are five types of PES they are :
1. Perfectively elastic supply (PES= ) : if a very small change in price brings infnite change in

quantity suppliied , it is called perfectly elastic supply.
2. Perfectly inelastic supply (PES=0) If the quantity supplied remain unchanged to the change in

price , it is called perfectively inelastic supply.
3. Relatively elastic supply (PES>1) if a smaller percentage change change in price brings relatively

greater percentage change in supply , it is called elastic supply
4. Relatively elastic supply PES<1) if a greater change in price brings relatively percentage change

in supply , it is called inelastic supply.
5. Unitary elastic supply (PES=1) : if the percentage change in price and quantity supplied are

equal , it is called unitary elastic supply .
The combine figure of all types of Pes is drawn below

price

quantity supplied

fig : types of elasticity of supply

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in the figure , price and quantity supplied are shown on Y-axis and X- axis respectively . From
figure
AB shows PES=
AC shows PES= 0
AD shows PES >1
AE shows PES<1
AF shows PES=1

.what are the determinant of elasticity of demand ?
The price elasticity of demand varies from goods to goods time to time place to place and
person to person. The responsible factors which brings the variation in the elasticity of demand
are known as determinants of electricity demand. some determines are explained below :-

1 Nature of commodity :-The elasticity of demand depend on the nature of commodity. The
demand for necessary things could be inelastic. The elasticity of luxuries tends to be elastic.

2) Availability of substitute goods:- commodity having more substitutes goods have elastic
demand. if the price of a commodity rises the people will see its close substitutes goods , as a
result the quantity demanded of goods will greatly decline ,on other hand consumer is
compelled to use a commodity whatever be the price. so demand for non-substitute goods is
inelastic

3 )verities of uses:-the demand for commodity having variety of uses is more elastic. For
example electricity and milk. Electricity can put to more than one use if its price is decrease

#4) possibility of postponement of consumer: goods having postpone have more elastic
demand . For example demand for rice relatively inelastic.

5) habit and custom goods:- if a commodity is demanded on account of habit and custom of
consumer then this demand is inelastic. For example coffee tea or cigarettes

6) Income of consumer: if the income of consumer is high, the commodity has less elastic
demand .opposite could be true for low income people
,
7) other determinants of price elasticity of demand
a. Price range
b. Percentage of income spend
c. Seasonal change
d. Price expectation
e. Time( short time or long time period or long time period)
f. Income distribution( equally or unequal distribution)

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