Disclaimer: This presentation is for educational

purposes only.
In ordinary sense, demand means desire.
 Ability to Willingness
Desire Demand
Pay to Pay
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2.0
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 According to Benham, “The demand for anything at a given price is
the amount of it, which will be bought per unit of time at that price.”
Image Courtesy: Artem Beliaikin, Pexels
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 Price

Demand
 “Other things being equal, the higher the price of the commodity,
smaller is the quantity demanded and lower the price of the commodity,
larger is the quantity demanded.”
Dx = f (Px)
Price of commodity ‘X’ Quantity demanded of
(in Rs.) commodity ‘X’ (in units)

1 50
2 40
3 30
4 20
5 10
 D
e
Price of Commodity X (In Rs.)

4 d

3 c

b
2
a
1
D

O Quantity Demanded of Commodity

10 20 30 40 50
X (in units)
 D

P2
Price

P1

P3

D
O Q3 Q1 Q2
Quantity Demanded
Image Courtesy: Security, Pixabay
Image Courtesy: MichaelWuensch, Pixabay
Image Courtesy: stux , Pixabay
Image Courtesy: JillWellington, Pixabay
Image Courtesy: Free-Photos, Pixabay
Image Courtesy: JillWellington, Pixabay
Image Courtesy: tookapic , Pixabay
Image Courtesy: birgl, Pixabay
Image Courtesy: cottonbro, Pexels
 Demand

Change in
Variation in
Demand
Demand (Price)
(Other Factors)

Expansion /
Contraction Increase Decrease
Extension

Income, Income,
Price Falls Price Rises Population, Population,
etc. Rises etc. Falls
Image Courtesy: RitaE, Pixabay
Price Quantity
(Temp: 30° C)
50 1
40 2
30 3
20 4
10 5
Price Quantity Quantity
(Temp: 30° C) (Temp: 40° C)
50 1 5
40 2 10
30 3 15
20 4 20
10 5 25
Price Quantity Quantity Quantity
(Temp: 30° C) (Temp: 40° C) (Temp: 50° C)
50 1 5 10
40 2 10 20
30 3 15 30
20 4 20 40
10 5 25 50
Price Quantity Quantity Quantity
(Temp: 30° C) (Temp: 40° C) (Temp: 50° C)
50 1 5 10
40 2 10 20
30 3 15 30
20 4 20 40
10 5 25 50
Price Quantity Quantity Quantity
(Temp: 30° C) (Temp: 40° C) (Temp: 50° C)
50 1 5 10
40 2 10 20
30 3 15 30
20 4 20 40
10 5 25 50
Image Courtesy: Artem Beliaikin, Pexels
 D

A
P1
Price

P2 B

D
O Q1 Q2
Quantity Demanded
Image Courtesy: AnnaliseArt, Pixabay
 D

B
P2
Price

P1 A

D
O Q2 Q1
Quantity Demanded
Image Courtesy: Jo-B, Pixabay
 D1 D2

A B
Price

P1

D2

D1
O Q1 Q2
Quantity Demanded
Image Courtesy: Jo-B, Pixabay
 D2 D1

B A
P1
Price

D1

D2
O Q2 Q1
Quantity Demanded
Image: "Rubberband Massacre" by frankieleon, Flickr is licensed under CC BY 2.0
 Elasticity of
Demand

Promotional
Price Elasticity of Income Elasticity Cross Elasticity of
Elasticity of
Demand of Demand Demand
Demand

Change in Change in Change in Due to

Change in
Demand due to Demand for Com Change in
Demand due to
Change in Income X due to Change in Promotional
Change in Price
of the Consumer Price of Com Y Acitivities
 Situation A Situation B Situation C
Price (Rs.) Quantity Price (Rs.) Quantity Price (Rs.) Quantity
Demanded Demanded Demanded
(units) (units) (units)
100 1000 100 1000 100 1000
110 800 110 900 110 950
 Situation A Situation B Situation C
Price (Rs.) Quantity Price (Rs.) Quantity Price (Rs.) Quantity
Demanded Demanded Demanded
(units) (units) (units)
100 1000 100 1000 100 1000
110 800 110 900 110 950

Price rises by 10% Price rises by 10% Price rises by 10%

Demand falls by 20% Demand falls by 10% Demand falls by 5%
 Elasticity of demand is defined as the responsiveness of the quantity
demanded of a good to changes in one of the variables on which
demand depends.
More precisely, elasticity of demand is the percentage change in
quantity demanded divided by the percentage change in one of the
variables on which demand depends.
 Proportionate change in quantity demanded
Elasticity of Demand =
Proportionate change in price
 Proportionate change in quantity demanded
Elasticity of Demand =
Proportionate change in price
A small change in quantity demanded (Q)
Elasticity of Demand= Original demand (Q)
A small change in price (P)
Original Price (P)
 Proportionate change in quantity demanded
Elasticity of Demand =
Proportionate change in price
A small change in quantity demanded (Q)
Elasticity of Demand= Original demand (Q)
A small change in price (P)
Original Price (P)
Q
Elasticity of Demand= Q
P
P
 Proportionate change in quantity demanded
Elasticity of Demand =
Proportionate change in price
A small change in quantity demanded (Q)
Elasticity of Demand= Original demand (Q)
A small change in price (P)
Original Price (P)
Q
Elasticity of Demand= Q
P
P
ΔQ P ΔQ P
Elasticity of Demand =  = 
Q ΔP ΔP Q
Image: The Federal Government of Germany. / Public domain
 1

Ed > 1 Ed = 1 Ed <1

Relatively Unitary Relatively

Elastic Elastic Inelastic
Demand Demand Demand
 When a change in a price of a commodity leads to a more than
proportionate change in its quantity demanded, it is known as
relatively elastic demand.
For e.g. if price falls by 10% and demand rises by 20%. It is mainly
found in case of luxuries.
 D
P1

10%
Price

P2
D

More than 10%

O Q1 Q2
Quantity Demanded
Image Courtesy: pearlsband, Pixabay
 When a change in a price of a commodity leads to a less than
proportionate change in its quantity demanded, it is known as
relatively elastic demand.
For e.g. if price falls by 10% and demand rises by 5%. It is mainly
found in case of necessities.
 D

P1

10%
Price

P2
Less than
10%

D
O Q1 Q2 Quantity Demanded
Image Courtesy: Bru-nO, Pixabay
 When a change in a price of a commodity leads to exact
proportionate change in its quantity demanded, it is known as
relatively elastic demand.
For e.g. if price falls by 10% and demand rises by 10%.
 D
P1

10%
Price

P2

10% D

O Q1 Q2 Quantity Demanded
Image Courtesy: geralt, Pixabay
 When at the same price or a small change in price brings about
infinite change in the quantity demanded, it is known as perfectly
elastic demand.
 D
P D
Price

D1 10%
P1 D1

O Quantity Demanded
Image Courtesy: geralt, Pixabay
 When a change in price has no effect in demand it is known as
perfectly inelastic demand.
 D

P1
10%
P2
Price

D
O Q Quantity Demanded
Image Courtesy: stevepb, Pixabay
 Price Elasticity of
Demand

Relatively Elastic Relatively

Unitary Elastic Perfectly Elastic Perfectly Inelastic
Demand Inelastic Demand
Demand Demand Demand
(Luxuries) (Necessities)

Ed > 1 Ed < 1 Ed = 1 Ed =  Ed = 0

Rectangular
Flatter curve Steeper curve Parallel to X axis Parallel to Y axis
Hyperbola
 Income elasticity of demand is defined as, “The degree of
responsiveness of demand for a commodity to a given change in income
of the consumer.”
 Proportionate change in demand
Elasticity of Demand =
Proportionate change in income of the consumer
A small change in demand (Q)
Original demand (Q)
Elasticity of Demand =
A small change in income of the consumer (Y)
Original income of the consumer (Y)
ΔQ
Q
Elasticity of Demand =
ΔY
Y
ΔQ Y ΔQ Y
Elasticity of Demand =  = 
Q ΔY ΔY Q
 More than One Income Elastic Demand

Y2 D

10%

Y1
Incom
e

More than 10%

O Q1 Q2
Quantity Demanded
Image Courtesy: pearlsband, Pixabay
 Less Than One Income Elastic Demand
D

Y2
10%
Incom

Y1
e

Less
than
10%

O Q1 Q2
Quantity Demanded
Image Courtesy: Bru-nO, Pixabay
 Unitary Income Elastic Demand

D
Y2

10%
Incom

Y1
e

D 10%

O Q1 Q2
Quantity Demanded
Image Courtesy: geralt, Pixabay
 Zero Income elastic Demand
D

Y2
10%
Y1
Incom
e

D
O Q
Quantity Demanded
Image Courtesy: stevepb, Pixabay
 Negative Income elastic Demand

D
Y1
Incom

Y2
e

O Q1 Q2
Quantity Demanded
Image Courtesy: Security, Pixabay
 Income Elasticity
of Demand

Relatively Elastic Relatively

Unitary Elastic Zero Elastic Negative
Demand Inelastic Demand
Demand Demand elasticity
(Luxuries) (Necessities)

Ed > 1 Ed < 1 Ed = 1 Ed = 0 Ed < 0

Slopes
Flatter curve Steeper curve Parallel to Y axis downwards from
left to right
 Cross elasticity of demand is defined as, “The degree of
responsiveness of demand for one commodity to a given change in price
of another commodity.”
 Proportionate change in demand for commodity X
Elasticity of Demand =
Proportionate change in price of commodity Y
A small change in demand for commodity X (Q X )
Original demand for commodity X (Q X )
Elasticity of Demand =
A small change in price of commodity Y (PY )
Original price of commodity Y (PY )
Q X
Q
Elasticity of Demand = X
PY
PY
Q X PY Q X PY
Elasticity of Demand =  = 
Q X PY PY Q X
 Positive Cross Elasticity of Demand

D
P2
Commodity Y
Price of

P1

O Q1 Q2
Quantity Demanded of commodity X
Image Courtesy: 12019, Pixabay
 Negative Cross Elasticity of Demand

D
P1
Commodity Y
Price of

P2

O Q1 Q2
Quantity Demanded of commodity Y
Image Courtesy: elljay, Pixabay
 Zero Cross elasticity of Demand
D

P2
Price of Commodity

P1
Y

D
O Q
Quantity Demanded of Commodity X
Image: "Raspberries" by Pexels, Pixabay is in the Public Domain, CC0
 Cross Elasticity
of Demand

Positive Negative Zero

Ed > 0 Ed < 0 Ed = 0

Substitutes Complementary Unrelated