Elasticity of demand

Learning objectives:

  1. Define price elasticity of demand
  2. Measure price elasticity of demand
  3. Define income elasticity of demand
  4. Define cross elasticity of demand
  5. State perfectly elastic demand
  6. Describe perfectly inelastic demand
  7. Narrate unitary elastic demand
  8. Define relatively elastic demand
  9. Identify relatively inelastic demand
  10. Apply percentage method for measurement of elasticity
  11. Apply total expenditure method for measurement of elasticity
  12. Explain point elasticity method for measuring elasticity
  13. Distinguish between income elasticity and cross elasticity
  14. Describe practical importance of elasticity

Demand and price have a relationship with each other. A change in price effects the demand level. The change in price may not be at the same rate. The change be at higher or lower rate. The variation in demand is called elasticity of demand. There are many goods like ghee, sugar and vegetables whose demand does not decrease due to increase their price. There other goods like cars televisions and air-conditioners whose demand decreases much due to increases in their prices. The degree of change in demand to a change in price is called elasticity of demand. price elasticity of demand may be unity, less than unity, more than unity, zero or infinite.