CLASS SUB

I PGDM PPT PRESENTATION IN MANGERIAL ECONOMICS

Elasticity of demand measures the responsiveness

of change in demand to change in price.

1) 2) 3) 4) 5)

Unitary Elasticity of demand Relatively Elastic demand Relatively Inelastic demand Perfectly Inelastic demand Perfectly Elastic demand

1) Unitary Elasticity of demand Price elasticity of demand is unitary when the change in demand is exactly proportionate to the change in price 2) Relatively Elastic demand When the change in demand is more than proportionate to the change in price, price Elasticity of demand is >1

3) Relatively Inelastic demand When the change in demand is less than proportionate to the change in price, price elasticity of demand is <1

4) Perfectly Inelastic demand Price Elasticity of demand is perfectly inelastic when whatever the change in price, there is absolutely no change in demand

5) Perfectly Elastic demand Price Elasticity if demand is infinity when a small change or no change in price leads to an infinitely large change in demand.

The concept of income elasticity of demand expresses the responsiveness of consumers demand for any good to the change in his income.
change in the quanity demanded of a commodity to the percentage change in income.

It may be defined as the ratio of percentage

In the case of luxuries the coefficient of income elasticity is positive but high.
In the case of necessities the coefficient of income is positive but low.

 In the case of comforts the coefficient of income is unity. In the case of inferior goods, the coefficient of income velocity is negative.