# elasticity of demand

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## Presentation Transcript

### WE STUDENTS OF :

WE STUDENTS OF PRESENTING MADE BY :- NEHA HOODA TARUN MITTAL GAURAV DHANKHAR MANI LOKESHWER TARUN GANDHI SUMIT GULATI BUSINESS SCHOOL OF DELHI ELASTICITY OF DEMAND

### LAW OF DEMAND :

LAW OF DEMAND Law of demand states that if price of commodity increases quantity demanded will falls and if price of commodity falls quantity will increases. Law of demand indicates only direction of change in quantity demanded in response to change in price but ELASTICITY OF DEMAND states with how much or to what extent the quantity demanded will change in response to change in price.

### ELASTICITY OF DEMAND :

ELASTICITY OF DEMAND ELASTICITY OF DEMAND is defined as the percentage change in quantity demanded divided by percentage change in price. -- MARSHALL PRICE ELASTICITY OF DEMAND measures the responsiveness of quantity demanded of a good to the change in its price. -- BOULDING Ed = % change in quantity demanded %change in price

### DEGREES OF ELASTICITY OF DEMAND :

DEGREES OF ELASTICITY OF DEMAND Perfectly Elastic :- It is a situation where the slightest rise in price cause the quantity demanded of the commodity to fall to zero. y p Ed=  price(Rs) 0 Q Q1 x Quantity demanded

### 2. Perfectly Inelastic :- It is a situation where there is no change in quantity demanded when price change. :

2. Perfectly Inelastic :- It is a situation where there is no change in quantity demanded when price change. y Ed=0 d p2 --------------- price(Rs) p1 --------------- perfectly inelastic p --------------- 0 Q x Quantity demanded

### 3. UNITARY ELASTIC DEMAND :- It is a situation when percentage change in price is same as change in quantity demanded. :

3. UNITARY ELASTIC DEMAND :- It is a situation when percentage change in price is same as change in quantity demanded. y D p Ed= 1 price(Rs) p1 D 0 q q1 x quantity demanded

### 4. GREATER THEN UNITARY ELASTIC :- it is a situation where percentage change in quantity demanded is greater then percentage change in price. :

4. GREATER THEN UNITARY ELASTIC :- it is a situation where percentage change in quantity demanded is greater then percentage change in price. y p d Ed<1 p1 price(Rs) d 0 Q Q1 x quantity demanded

### 5.LESS THAN UNITARY ELASTIC :- It is a situation where percentage change in quantity demanded is less then price. :

5.LESS THAN UNITARY ELASTIC :- It is a situation where percentage change in quantity demanded is less then price. y d p price(Rs) ED>1 p1 d 0 Q Q1 x quantity demanded

### DETERMINANTS OF ELASTICITY OF DEMAND :

DETERMINANTS OF ELASTICITY OF DEMAND Availability of substitutes Proportion of income spent on a commodity Different uses of commodity Habit of consumer Nature of commodity Postponement of the use

### IMPORTANCE OF PRICE ELASTICITY OF DEMAND :

IMPORTANCE OF PRICE ELASTICITY OF DEMAND To a monopolist To a finance minister Useful in factor pricing Useful in international trade Explanation of paradox of poverty of farmer

### 2.CROSS ELASTICITY OF DEMAND:- :

2.CROSS ELASTICITY OF DEMAND:- It is a situation when demand of a commodity change due to change in the price of other commodity but its own price remain the same. y Dx D’y y D Price p p p1 Dx Dy D 0 Quantity x 0 Quantity x (a) demand of goods x (b) demand of goods y % change in quantity demanded of good x Elasticity of DD X for Y = %change in price of good y

### 3.INCOME ELASTICITY OF DEMAND :

3.INCOME ELASTICITY OF DEMAND It shows the degree of responsiveness of quantity demand of a good to change in income of consumers. y D I Ix D 0 Q Q1 x %change in quantity demanded Elasticity of demand= %change in income

### THE END :

THE END THANKS FOR YOUR COPERATION