Concept of elasticity.

The quantities changing their values,size or

structure are known as variables.This
characteristic of change is regarded as
“elasticity.”
For example # elastic goods and services
include furniture motor -vehicles etc.
Elasticity of demand.
INTRODUCTION #
The Concept of elasticity was initially
introduced by Alfred Marshall in 1890
in his well-known book “PRINCIPLES
OF ECONOMICS”.
 DEFINATIONS
1# According to “law of • 2# According to “stonier and Hague”
demand” it is clear that Elasticity of demand is a technical
a change in price results term used by economists to describe
an inverse change in the degree of responsiveness of the
quantity demanded . An
increase in price shows demand for good to the change in its
“contraction in demand” price ..
and vice versa. • 3# “Elasticity of demand is the rate
of change in quantity demanded in
response to change in price”
 • More elastic demand.
• Less elastic demand.
• Zero elasticity of demand.
• Infinite elasticity of demand.
 • A Relatively smaller change in price resulting a
MORE ELASTIC big change in quantity demand for a good is
known as “More elastic demand good”
DEMAND. • For Example # colour TV ,Air conditioners,
costly cars. etc
LESS elastic • A relatively large change in price resulting a smaller change in quantity
demanded for a good is regarded as”less elastic demand”.for example
demand. • Basic necessities i.e Flour ,ghee,salt etc.
Zero elasticity of
demand.
• When demad does not
respond even a big change in
price.
• Demand curves becomes
vertical towards x-axis.
Infinite
elasticity.
• When demand goes on
increasing at the same
price .Demand curve
become perfectly elastic
and parallel to x-axis.
Measurement of Elasticity of
Demand.
Three methods to measure the elasticity of demand.
• unitary Method
• percentage Method
• Formula Method
A.E=1(EQUAL
TO UNITY)
The rate of change in both
being equal indicates
that;with the increase or
decrease in price,the total
outlay remains
unchanged.These goods
are neither included in
“necessaries “nor in
“luxuries”i.e Tissue
paper,paper weight etc.
E<1(Greater than
unity)
When proportionate
change in demand
for a good is more
than the change in
its price . Luxuries
are included in this
category.
 According to this method

1.UNITARY Ed =proportional change in quantity

demanded/proportional change in price
METHOD.. It may take three forms ..
a. E=1 b.E>1 c . E>1