Elasticity of demand and its Types

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Elasticity of demand and its Types
Elasticity of demand and its Types

We have detail informations of Elasticity of demand and its Types.

Elasticity of demand and its Types

Following is the details informations

Elasticity of Demand

Elasticity of demand refers to the ratio of percentage of chnage in quantity demanded with the ratio of percentage change in quantitative determinant of demand.

The law of demand shows the direction of change in the demand with the change in price. But this law doesnot explain what percentage in percentage in perice leads to what percentage change in demand.

Although, there are many factors that determine the demand for a commodity, only four of them are important for elasticity of demand process.

  • Price of the commodity
  • Income of the consumer
  • Price of other Commodities
  • Advertising expenditure

Elasticity of demand = ( Percentage change in demand / Percentage change in determinants of demand )

Types of Elesticity of Demand

Following are the types:

1. Price elasticity of demand (Ep)

Other things remaining the same, price elasticity of demand is the ratio of the percentage change in the demand for a commodity with the percentage change in price of the same commodity.

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2. Income elasticity of demand (Ey)

Other thing remaining the same, income elasticity of demand is the ratio of the percentage change in the demand for a commodity with the percentage change in incone of the consumer.

3. Cross elasticity of demand (Exy)

It is the ratio of proportionate change in the quantity demanded of Y to a given proportionate change in the price of the related commodity X.

4. Advertising elasticity of demand

The ratio of percentage change in quantity demanded and percentage change in advertisement expenditure is called advertising eleasticity of demand.

Hence, these are the Elasticity of demand and its Types.

Other Important Links:

BBS 1st year Semester All subject Notes: CLICK HERE

BBS 1st Year Microeconomics Notes: CLICK HERE

Frequently Asked Questions

What is Elasticity of demand and its Types?

= Elasticity of demand refers to the ratio of percentage of chnage in quantity demanded with the ratio of percentage change in quantitative determinant of demand.

Following are the types:

  • Price elasticity of demand (Ep)
  • Income elasticity of demand (Ey)
  • Cross elasticity of demand (Exy)
  • Advertising elasticity of demand