Module 3: elasticity of demand
To understand the rate of change in price and consequent change in demand
Meaning of elasticity of demand
= the responsiveness of demand for a commodity to change in its determinants
Price elasticity of demand = % change in Qd / % change in price
Definition of elasticity of demand
= Elasticity of demand is the responsiveness of the quantity demanded of a
commodity to changes in one of the variables on which demand depends.
Price elasticity of demand (PED)
= a measure of the responsiveness of the quantity of a good or service
demanded to changes in its price.
Price elasticity of demand = % change in Qd / % change in price
Income elasticity of demand
Income elasticity of demand = Percentage change in Qd / percentage change in
income
Cross elasticity of demand
takes into account the change in the price of commodity Y and its effects on
the demand for commodity X.
Cross elasticity of demand = % change in Qd for good A / change in price of
good B
Advertising or promotional elasticity of demand
= a measure of an advertising campaign’s effectiveness in generating new sales.
Promotional ED = proportionate change in Qd of X / proportionate change in
advertisement in expenditure
Elastic and inelastic demand
Elasticity of demand = the change in demand when there's a change in price.
Inelastic demand = consumer demand for a product does not change
proportionately with a fall or rise in its price.
Degrees of price elasticity of demand
1. Perfectly elastic demand
a. Small change in price leads to an infinite change in demand
To understand the rate of change in price and consequent change in demand
Meaning of elasticity of demand
= the responsiveness of demand for a commodity to change in its determinants
Price elasticity of demand = % change in Qd / % change in price
Definition of elasticity of demand
= Elasticity of demand is the responsiveness of the quantity demanded of a
commodity to changes in one of the variables on which demand depends.
Price elasticity of demand (PED)
= a measure of the responsiveness of the quantity of a good or service
demanded to changes in its price.
Price elasticity of demand = % change in Qd / % change in price
Income elasticity of demand
Income elasticity of demand = Percentage change in Qd / percentage change in
income
Cross elasticity of demand
takes into account the change in the price of commodity Y and its effects on
the demand for commodity X.
Cross elasticity of demand = % change in Qd for good A / change in price of
good B
Advertising or promotional elasticity of demand
= a measure of an advertising campaign’s effectiveness in generating new sales.
Promotional ED = proportionate change in Qd of X / proportionate change in
advertisement in expenditure
Elastic and inelastic demand
Elasticity of demand = the change in demand when there's a change in price.
Inelastic demand = consumer demand for a product does not change
proportionately with a fall or rise in its price.
Degrees of price elasticity of demand
1. Perfectly elastic demand
a. Small change in price leads to an infinite change in demand
