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Elasticity of Demand

# Elasticity of Demand

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Elasticity of Demand and supply
Elasticity of Demand and supply

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04/24/2013

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ELASTICITY OF DEMANDELASTICITY OF DEMAND
The Responsiveness of buyers to a change in the priceThe Responsiveness of buyers to a change in the priceof a commodity is called as Elasticity of Demand.of a commodity is called as Elasticity of Demand.
It is the rate at which the quantity demanded of aIt is the rate at which the quantity demanded of acommodity varies with a change in price.commodity varies with a change in price.
Demand is also effected by the Income of the customersDemand is also effected by the Income of the customersand prices of related goods. So therefore, we haveand prices of related goods. So therefore, we haveIncome Elasticity of Demand (Ey) and Cross ElasticityIncome Elasticity of Demand (Ey) and Cross Elasticityof Demand (Exy)of Demand (Exy)

TYPES OF ELASTICITY OFTYPES OF ELASTICITY OFDEMANDDEMAND
1. Price Elasticity of Demand (Ed):1. Price Elasticity of Demand (Ed):
It is the ratio of the percentage change in quantityIt is the ratio of the percentage change in quantitydemanded of a product to the percentage change indemanded of a product to the percentage change inits price.its price.Ed =Ed =% change in Qd% chan

ge in Qd==q/q

q/q% change in Price p/p% change in Price p/p
1. Price Elasticity of Demand (Ed):
It is the ratio of the percentage change in quantitydemanded of a product to the percentage change inits price.Ed = % change in Qd =

q/q% change in Price p/p

TYPES OF ELASTICITY OF DEMAND
2. Income Elasticity of Demand (Ey):2. Income Elasticity of Demand (Ey):
It is the degree of change or responsiveness of It is the degree of change or responsiveness of quantity demanded of a good to a change in thequantity demanded of a good to a change in theincomeincomeof the consumer.of the consumer.Ey =Ey =% change in Qd% chan

ge in Qd==q/q

q/q% change in Income y/y% change in Income y/y