Pre-reading Activity

 Define Demand
 Relation between price and demand
 Graphical representation of the Demand curve

1
Elasticity and its Measurement

2
 Concept of Elasticity of Demand
 The responsive change in the demand for the
commodity due to change in any of its determinants
like the price of the same commodity, the price of the
related commodity, the consumer income, tastes and
preference etc.

 The ratio of percentage change in the demand of the

commodity to change in its determinants.

3
 Types of Elasticity of Demand

 Price Elasticity of demand

 Income Elasticity of Demand
 Cross Elasticity of Demand

4
 Price Elasticity of demand

Concept

 Quantity demanded for the commodity is

changed due to change in its price.

5
 Types of Price Elasticity of demand

Perfectly Elastic Demand

Perfectly inelastic Demand
Unitary elastic Demand
Relatively elastic Demand
Relatively inelastic Demand

6
 Perfectly Elastic demand(Ep=∞)
Graphical Representation
Perfectly Elasticity
Y-axis Demand Curve (P1D)

Ep=∞
P1 D
Price

X-axis
O Q1 Q2 Q3 Q4

Quantity Demanded

Fig. i)
7

Note:- No change in price cause infinite change quantity demanded.

From the fig. i), P1D show the perfectly elastic
demand curve. We can see that when price remain
constant (i.e. OP1), the quantity demanded is changed
i.e. from OQ1 to OQ2, to OQ3, OQ4. It show that
demand of the quantity is changed, if neither changed
in price of the commodity in the case of perfectly
elastic demand .

8
Graphical Representation
Perfectly inelastic demand(Ep=0)

Y-axis Perfectly inelastic

Demand Curve (Q1D)

P3
Price

Ep=0
P2

P1

X-axis
O Q1

Quantity Demanded

Fig. ii)
9

Note:- change in price cause no change in quantity demanded.

From the fig. ii), Q1D show the perfectly inelastic
demand curve. We can see that quantity demanded
remain same (i.e. OQ1) But, it price are change
( i.e. from OP1, to OP2, OP3,) It show that demand
of the quantity remain unchanged, if changed in
price of the commodity in the case of perfectly
inelastic demand

10
 Unitary elastic demand(Ep=1)
Graphical Representation
Y-axis Unitary elastic Demand
Curve (DD1)
D

P1

Ep=1
Price

20%
P2

D1
20%
X-axis
O Q1 Q2

Quantity Demanded

Fig. ii)

Note:- Percentage of change in price and change in quantity demanded is always equal.
From the fig. iii), D1D show the unitary elastic demand curve. We
can see that when price is decreased by 20% (i.e. from OP1, to
OP2), it`s demand also increased by 20% (i.e. from OQ1 to OQ2 ).
It show that when price is decreased by certain percentage or
number then it`s quantity demand for that commodities is also
increased by same percentage or number in the case of unitary
elastic demand

12
 Relatively elastic demand(Ep<1)
Graphical Representation
Y-axis
Relatively elastic Demand
Curve (DD1)
D

P1

Ep>1
Price

10%
P2

D1
20%
X-axis
O Q1 Q2

Quantity Demanded

Fig. ii)

Note:- Change in percentage of quantity demanded is more than the percentage of

change in its price.
13
From the fig. iv), D1D show the relatively elastic demand curve.
We can see that when price is decreased by 10% (i.e. from OP1, to
OP2), it`s demand is increased by 20% (i.e. from OQ1 to OQ2 ). It
show that when price is decreased by certain percentage or number
then it`s quantity demand is increased more than that percentage or
number in the case of relatively elastic demand

14
 Relatively inelastic demand(Ep>1)
Graphical Representation
Y-axis
Relatively inelastic
Demand Curve (DD1)
D

P1

Ep>1
Price

20%
P2

10%
D1
X-axis
O Q1 Q2

Quantity Demanded

Fig. ii)

Note:- Change in percentage of quantity demanded is less than the percentage of

change in its price.
15
From the fig. v), D1D show the relatively inelastic
demand curve. We can see that when price is decreased
by 20% (i.e. from OP1, to OP2), it`s demand is
increased by 10% (i.e. from OQ1 to OQ2 ). It show that
when price is decreased by certain percentage or
number then it`s quantity demand is increased less than
that percentage or number in the case of relatively
inelastic demand

16
 Income Elasticity of Demand

 Quantity demanded for the commodity is

changed due to change in the income of the
consumers.

17
Types of Income Elasticity of Demand

18