Elasticities of demand
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14012011, 04:12 PM
Elasticities of demand.ppt (Size: 404.5 KB / Downloads: 64) Group Members Sonali Gupta Subhra Prova Roy Saikat Mondal ELASTICITIES OF DEMAND Managerial point of view, however, the knowledge of nature of relationship alone is not sufficient. What is more important is the extent of relationship or the degree of responsiveness of demand to the changes in its determinants. The degree of responsiveness of demand to the change in it determinants is called elasticity of demand. CONCEPT OF ELASTICITY Elasticity is the percentage change in one variable in response to a one percent change in another variable. WHY WE USE ELASTICITY The demand of a good depends not only on its price, but also on consumer income and on the prices of other goods. For example, if the price of tea increases, the quantity demanded will fall. Often, however, we want to know how the quantity demand will rise or fall. How sensitive is the demand or tea to its price? If price increases by 10%, how much the will the quantity demanded change? How much will it change if the income rises by 10%? WE USE ELASTICITIES TO ANSWER QUESTION LIKE THESE. TYPES OF ELASTICITY Price elasticity of demand Income elasticity of demand Cross price elasticity of demand Promotional or advertising elasticity of demand Price elasticity of demand Price elasticity of demand measures the percentage change in quantity demanded due to one percent change in price of the good ,other variables remaining constant Measurement of price elasticity Percentage method Total outlay method Point method Arc method Percentage method According to this method elasticity of demand is the ratio of percentage (or proportionate) change in quantity demanded to percentage (or proportionate) change in price Total outlay method This method helps to know whether elasticity of demand is equal to one, greater than one,or less than one Elasticity one: if the rise or fall in price keeps the total outlay unaffected Elasticity is more than one: if fall in price leads to increase in total outlay, while rise in price reduces total outlay Elasticity is less than one: if fall in price reduces total outlay, while rise in price increases total outlay 


seminar ideas Super Moderator Posts: 10,003 Joined: Apr 2012 
25042012, 12:52 PM
Elasticities of demand
varma econ.pptx (Size: 125.53 KB / Downloads: 21) Alford Marshall developed the concept of elasticity of demand which measures the responsiveness of quantity demanded to changes in price. To be more precise, elasticity of demand is defined as “the relative change in the quantity demanded to the relative change in the price”. Types of elasticity of demand There are three types of elasticity of demand Price of elasticity of demand Income elasticity of demand Cross elasticity of demand Price elasticity of demand (Ed) This shows the responsiveness of quantity demanded of a commodity, when price of that commodity changes, with other factors being constant. Cross elasticity of demand (Exy) Demand of one good (X) is also influenced by the price of other related good(Y). These may be substitute or complement. It is the ratio of percentage change in quantity demanded of commodity (X) and percentage change in price of related commodity (Y). Perfectly inelastic demand It is situation in which change in price of a commodity leaves the demand unaffected. The price of the commodity may increase or decrease, but the quantity demanded remains the same. 


