Elasticity of Demand (Microeconomics)

Elasticity of Demand

Elasticity of Demand:

It refers to percentage change in Demand for a commodity with respect to
factor influencing demand of that commodity.

E.D.= % ∆Dx / % ∆factor affecting Dx



Price Elasticity of Demand: It refers to percentage change in Quantity
Demand of a commodity with respect to percentage change in Price of
that commodity.
P.E.D.= %∆QDX / %∆PX
Cross Elasticity of Demand: It refers to percentage change in Quantity
Demand of a commodity with respect to Percentage change in Price of its
related commodity.
C.E.D.= %∆ QDX / %∆PY
QDX= Quantity Demand of commodity X
PY= Price of its related commodity Y
Income Elasticity of Demand: It refers to percentage change in Quantity
Demand of a commodity with respect to percentage change in Income of
the consumer.
I. E. D. =%∆QD /%∆I
I= Income of the consumer



Degree of Price Elasticity of Demand

, When price of different commodity changes than Quantity Demand
of each commodity reacts in a different manners.
There are various kinds of P.E.D.
(1) Perfectly Elastic Demand
When there is an Infinite demand at a particular price and demand
become zero with a slight rise in price, then demand for such a
commodity is said to be Perfectly Elastic Demand.
In this case E.D.= Infinite


Price Demand
30 100
30 200
30 300
Diagram:




 It must be noted that Perfectly Elastic Demand is an imaginary
situation.
(2) Perfectly Inelastic Demand