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  • Market Equilibrium Elasticity of Demand Price Elasticity of Demand Income Elasticity of Demand Cross Elasticity of Demand

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    1. Market equilibrium is reached when the quantity demanded by consumers is equal to the quantity supplied by producers at a single, equilibrium price. 2. Elasticity of demand refers to the degree of responsiveness of quantity demanded to changes in price, income, and prices of related goods. There are three types: price elasticity of demand, income elasticity of demand, and cross elasticity of demand. 3. Price elasticity of demand measures the change in quantity demanded of a good relative to a change in its own price. Income elasticity of demand measures the change in quantity demanded relative to a change in consumer income. Cross elasticity of demand measures the change in quantity demanded of one good relative to a

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    Lecture.no.4

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    1. Market equilibrium is reached when the quantity demanded by consumers is equal to the quantity supplied by producers at a single, equilibrium price. 2. Elasticity of demand refers to the degree of responsiveness of quantity demanded to changes in price, income, and prices of related goods. There are three types: price elasticity of demand, income elasticity of demand, and cross elasticity of demand. 3. Price elasticity of demand measures the change in quantity demanded of a good relative to a change in its own price. Income elasticity of demand measures the change in quantity demanded relative to a change in consumer income. Cross elasticity of demand measures the change in quantity demanded of one good relative to a

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    4 views10 pages

    Market Equilibrium Elasticity of Demand Price Elasticity of Demand Income Elasticity of Demand Cross Elasticity of Demand

    Uploaded by

    Noman Hameed
    1. Market equilibrium is reached when the quantity demanded by consumers is equal to the quantity supplied by producers at a single, equilibrium price. 2. Elasticity of demand refers to the degree of responsiveness of quantity demanded to changes in price, income, and prices of related goods. There are three types: price elasticity of demand, income elasticity of demand, and cross elasticity of demand. 3. Price elasticity of demand measures the change in quantity demanded of a good relative to a change in its own price. Income elasticity of demand measures the change in quantity demanded relative to a change in consumer income. Cross elasticity of demand measures the change in quantity demanded of one good relative to a

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    MARKET EQUILIBRIUM ELASTICITY OF DEMAND PRICE ELASTICITY OF DEMAND INCOME ELASTICITY OF DEMAND CROSS ELASTICITY OF DEMAND

    Market Equilibrium
    It is the condition of the market where Quantity demand of a product by the consumer is equal to its quantity supplied by the supplier at the offered price by the consumer and charged price by the supplier.

    That is,
    If QDC = QSs At Pc = Ps

    Market Equilibrium

    SUPPLY CURVE

    Pc = Ps

    E0

    PRICE LINE

    DEMAND CURVE Qdc = Qss

    ELASTICITY OF DEMAND
    It is categorized into three types. 1 Price Elasticity of demand: PED = QD x / PRICE x

    2 Income elasticity of demand: IED = QD / INCOME 3 Cross elasticity of demand: CED = QDX / PRICEY

    ELASTICITY OF DEMAND

    1 Price Elasticity of demand:


    PED = QD x / PRICE x The change in Quantity demand of a product due to the change in price of that product is called price elasticity of demand (PED) for that product.

    Example
    If the quantity demand of tea is decreased due to the increase in price of tea then it is called the price elasticity of demand for tea. OR if the quantity demand of tea is increased due to the decrease in price of tea then it is also called price elasticity of demand for tea.

    2 Income elasticity of demand


    IED = QD / INCOME The change in quantity demand of a product due to the change in income of consumer is called income elasticity of demand(IED).

    Example
    If The quantity demand of a tea is decreased due to the decrease in income of consumer then it is called the income elasticity of demand (IED). OR If the quantity demand of a tea is increased due to the increase in income of a consumer then it is called the income elasticity of demand (IED)

    3 Cross elasticity of demand


    CED = QDX / PRICEY The change in quantity demand of X product due to the change in price of Y product is called the cross elasticity of demand for X to Y ( CEDxy ).

    Example
    If the quantity demand of tea is decreased due to the decrease in the price of coffee then it is called cross elasticity of demand for tea to coffee. OR If the quantity demand of the tea is decreased due to the increase in the price of milk then it is called the cross elasticity of demand for tea to milk. NOTE : 1# Tea & Coffee are substitute goods 2# Tea & Milk are complementary goods.

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