Understanding Elasticity of Demand in Microeconomics
Elasticity of demand in microeconomics explores the qualitative and quantitative relationships between demand and price. It examines how changes in various factors affect consumer behavior and demand for goods and services. Factors such as price, consumer income, prices of related commodities, number of customers, government policies, selling costs, and traditions play a crucial role in determining the elasticity of demand. Different types of elasticity, including price elasticity, income elasticity, and cross elasticity, provide insights into consumer responsiveness to changes in price, income, and related goods.
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Paper - Micro Economics Elasticity of Demand Presented By Mr. G. C. Khamkar Assistant Professor, Department of Economics, SPMM, Satara
Elasticity of Demand Law of Demand Explains Qualitative Relationship between Demand and Price Elasticity of Demand - Explains Quantitative Relationship between Demand and factors affecting on Demand.
Meaning 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 . In other words, it is the percentage change in quantity demanded the percentage in one of the variables on which demand depends. divided by
Factors Affecting on Demand Price of the commodity Consumer s income. Prices of related commodities Number of Customers Government Policy Selling Cost Traditions.
Types of Elasticity of Demand Price Elasticity Income Elasticity Cross Elasticity
Price Elasticity of Demand The price elasticity of demand is the response of the quantity demanded to change in the price of a commodity. It is assumed that the consumer s income, tastes, and prices of all other goods are steady. It is measured as a percentage change in the quantity demanded divided by the percentage change in price.
Income Elasticity of Demand The income elasticity of demand is the degree of responsiveness of the quantity demanded to a change in the consumer s income. % Change in Demand Income Elasticity = ---------------------------- % Change in Income
Cross Elasticity of Demand The cross elasticity of demand of a commodity X for another commodity Y, is the change in demand of commodity X due to a change in the price of commodity Y. % Change in Demand of X Good Cross Elasticity = ----------------------------------------- % Change in Price of Y Good
