ELASTICITY OF DEMAND

PREPARED BY: ALI MARK P. JAUGAN

ELASTICITY OF DEMAND

DEMAND SCHEDULE
LAW OF DEMAND:
“ When the price increases the quantity demanded
tends to fall”
 The tabular presentation of the law of demand
 ELASTICITY OF DEMAND

PRICE QUANTITY DEMANDED

100 0
80 10
60 20
50 30
40 40 DEMAND CURVE:
SCHEDULE
• Diagrammatic or Graphical representation
P of the law of demand.
120
100
80
NOTE :
60
P: price
40 Qd: Quantity Demanded
20
0
0 5 10 15 20 25 30 35 40 45
DEMAND CURVE
Qd
ELASTICITY OF DEMAND

The 5 Zones Of Price Elasticity

 Perfectly Elastic
 Relatively Elastic
 Unit Elastic
 Relatively Inelastic
 Perfectly Inelastic
ELASTICITY OF DEMAND

The 5 Zones Of Price Elasticity

 Perfectly Elastic (< infinite ): In this zone, there’s very small changes in price results in a very large change in the quantity demanded.

 Relatively Elastic ( >1): In this zone is where small changes in your price cause large changes in quantity demanded.

 Unit Elastic ( 1):  For this zone, this is where any change in price is matched by an equal change in quantity.

 Relatively Inelastic (<1): This is the zone where large changes in your price cause small changes in demand.

 Perfectly Inelastic (0): In this zone, this is where the quantity demanded does not change when the price changes. Products in this category are things
consumers absolutely need and there are no other options from which to obtain them.
ELASTICITY OF DEMAND

0 <1 1 >1

8
ELASTICITY OF DEMAND

 In economics, the demand elasticity refers to how sensitive the demand for a good is to
changes in other economic variables.
Formula:
ELASTICITY OF DEMAND

Step 1:

NOTE:
Q1: Previous
Q2: New
P1: Previous
P2: New
ELASTICITY OF DEMAND

Step 2: Step 3: