ELASTICITY OF

DEMAND
Elasticity of demand, a cornerstone concept in economics, precisely measures the
responsiveness of the quantity demanded of a good or service to changes in its price.
It essentially quantifies how much consumers adjust their purchasing behavior in
response to fluctuations in the price of a product or service.

The elasticity of demand formula, represented by Ed, can be calculated as the

percentage change in price divided by the percentage change in quantity demanded.
It illustrates the proportional connection between changes in price and quantity
demanded.
The percentage change in quantity demanded is determined by taking the
difference between the new quantity demanded and the original quantity
demanded,then dividing by the original quantity demanded and finally multiplying it
to 100% to express it as percentage
The percentage change in price is calculated similarly, with the difference being
the change in price divided by the original price, then multiplied by 100% to
express it as a percentage.

Percentage change in price=(Change in price\original price)×100%

Combining these percentages according to the elasticity formula yields the

elasticity of demand, indicating whether demand is relatively elastic, inelastic,
or unit elastic.
 TYPES OF ELASTICITY OF
DEMAND

There are three types of elasticity of

demand:

Price Elasticity of Demand

Income Elasticity of Demand

Cross Elasticity of Demand

 PRICE ELASTICITY
OF DEMAND
Marshall, a renowned economist, is credited with introducing the concept of price
elasticity of demand. This concept is crucial in measuring the sensitivity of quantity
demanded to changes in price. It quantifies the ratio of the percentage change in
quantity demanded to the percentage change in price. By understanding the
proportional change in the quantity demanded of a product, economists can gain
valuable insights into consumer behavior and market dynamics. Price elasticity of
demand (PED) is a useful tool for economists and businesses to comprehend how
changes in price impact consumer behavior and demand for various goods and
services.

The formula for calculating price elasticity of demand is: PED = % Change in
Quantity Demanded / % Change in Price.
 Income Elasticity Of
Demand
The concept of income elasticity of demand in economics
quantifies how the quantity demanded of a product or service
changes in response to a change in consumer income, assuming
all other factors remain constant. It is determined by dividing the
percentage change in quantity demanded by the percentage
change in income.

Mathematically, the formula for income elasticity of demand (Eᵢ)

is:

Eᵢ = Percentage change in income / Percentage change in quantity

demanded.
 CROSS ELASTICITY OF DEMAND
Cross elasticity of demand is an important concept in economics that measures the
responsiveness of the quantity demanded of one good to a change in the price of
another good. It provides insights into the relationship between different goods and
how consumers' purchasing decisions are influenced by price changes.

To calculate cross elasticity of demand (XED),divide the percentage change in the

quantity demanded of one good by the percentage change in the price of another
good. This can be expressed using the formula: % Change in Quantity Demanded of
Good A / % Change in Price of Good B = XED = % Change in Price of Good B / %
Change in Quantity Demanded of Good A.

By analyzing the cross elasticity of demand, economists can determine whether two
goods are substitutes or complements. If the XED value is positive, it indicates that
the goods are substitutes, meaning that an increase in the price of one good leads
to an increase in the
 CONCLUSION
In conclusion, elasticity of demand is a
fundamental concept in economics that
measures the responsiveness of quantity
demanded to changes in various factors such
as price, income, or the price of related goods.
By analyzing elasticity, economists and
businesses gain valuable insights into
consumer behavior and market dynamics.
Presented by
ADITYA SHARMA
RAJISH KUMAR CHOUBEY