ELASTICITY

OFDEMAN
D
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

 PRICE
OF
ELASTICITY
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 P rice.
 Income Elasticity
Of Deman
d
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
 CONCLUSIO
N
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
Presented
by
ADITYA SHARMA
RAJISH KUMAR
CHOUBEY