Elasticity of Demand

Elasticity of Demand means change in demand due to change in variable factors in which demand depends like change in price,change in income,change in price of substitute or complementary goods .So,the changes in demand is known as Elasticity of demand.Changes in demand is depends on many factors,these are if the demand change due to change in price of product is called Price Elasticity of demand, because changes comes in product due to change in it's price.

Income Elasticity-If the changes in demand comes due to change in  income is called income elasticity of demand.

          Price Elasticity..

When the demand of product is changes due to change in its price is called Price Elasticity of Demand it is calculated as..

Price Elasticity of Demand=

              %change in quantity demanded

                                   %change in price

    Degrees of Price Elasticity of Demand..

1) Perfectly Inelastic Demand Ed=0--When the demand for the product does not change as per price changes is called Perfectly Inelastic Demand.

  

 

According to fig in ox axis price of product is shown and in oy axis quantity demanded is shown when the price rise from op to op1 but quantity demanded is does not change whether price increase or decrease that is called perfectly Inelastic Demand , products like food,water, medicine,salt have Perfectly Inelastic Demand because these are necessary for life so their demand is not change although prices are changes.

2) Unitary Elastic Demand ed=1-When %change quantity demanded is equal to %change in price of product is called Unitary Elastic demand.

According to fig.In ox axis quantity demanded is shown and oy axis price is shown when the price rise from op to op1 quantity demanded is also increase from oq to oq1 .In Unitary Elastic demand quantity demanded is also increase in same proportion as the price is increases.Suppose price of product is increase by 10% , quantity demanded is also increase by 10%. 

3)  Perfectly Elastic demand-In this case there is no change or minor change in price leads to very much rise or fall in quantity demanded.

According to fig price of product op at that price demand rise from oq to oq1  it is said that demand is perfectly Elastic because minor change or no change in price leads very much change in price ..

4) Highly Elastic demand-Where the demand is very much change than it's price,that is highly Elastic demand.

According to fig when price rise from op to op1 quantity demanded rises from oq to oq1 there is very much change in demand that is why it is called highly Elastic demand.

5) Highly Inelastic Demand-When the price of product is very much change but there is little change quantity demanded that is called highly Inelastic Demand.inelastic means no.change or little change.

According to fig when price rise from op to op1 then quantity demanded rise from oq to oq1  there is little change in demand compare to price that is why it is called highly Inelastic Demand.