![1. Income elasticity more than 1,it is luxury goods or a superior goods. Ex- AC, CAR etc.
E>1
2. Income elasticity less than 1, a necessity good or a necessary good is a type of normal good
E<1 - Essential goods Ex - medicines
3. Income elasticity is 0 , that an increase in income does not change the quantity demanded of the
good.
E=0
4. Income elasticity is negative is associated with inferior goods . Ex- Instant noodles, Beer, Grocery
goods etc.
E<0
5. Income elasticity is more than 0 [Postive Income Elasticity]
E>0 Normal goods
6. Income elasticity is equal to 1
E=1 Semi Luxury
Elasticity of demand](https://image.slidesharecdn.com/unit2elasticity-of-demand-250202125705-be90fb0a/85/UNIT-2-Elasticity-of-Demand-for-BBA-students-7-320.jpg)
UNIT 2 Elasticity-of-Demand for BBA students.
- 1. Elasticity of demand It is defined as the responsiveness of the quantity demanded of good to the change in price, income, and price of related good. Elasticity of demand
- 2. Type of Elasticity of Demand Types of Elasticity of Demand Price Elasticity Income Elasticity Cross Elasticity Elasticity of demand
- 3. Price Elasticity of Demand Price Elasticity of Demand expresses response of quantity demanded of a commodity to changes in its price. = EP= Where: ∆Q= Change in quantity ∆P= Change in price Q=Original quantity P=Original price Elasticity of demand
- 4. Degrees of Price Elasticity- 1. Perfectly Elastic Demand- E=∞ 2. Perfectly Inelastic Demand- E=0 1 2 3 0 5 10 15 Quantity Price 0 100 200 0 2 4 6 8 10 12 Quantity Price Elasticity of demand
- 5. 3. Unitary Elastic Demand E=1 4. Highly Elastic or Relative Elastic Demand E>1 5. Inelastic Demand E<1 0 60 120 180 240 0 2 4 6 8 10 12 Quantity Price Elasticity of demand
- 6. Income Elasticity of Demand- The degree of responsiveness of demand for a product to the change in income of a consumer is known as income elasticity. Elasticity of demand
- 7. 1. Income elasticity more than 1,it is luxury goods or a superior goods. Ex- AC, CAR etc. E>1 2. Income elasticity less than 1, a necessity good or a necessary good is a type of normal good E<1 - Essential goods Ex - medicines 3. Income elasticity is 0 , that an increase in income does not change the quantity demanded of the good. E=0 4. Income elasticity is negative is associated with inferior goods . Ex- Instant noodles, Beer, Grocery goods etc. E<0 5. Income elasticity is more than 0 [Postive Income Elasticity] E>0 Normal goods 6. Income elasticity is equal to 1 E=1 Semi Luxury Elasticity of demand
- 8. Cross Elasticity of Demand A change in price of one article causes a change in demand of another article. Elasticity of demand
- 9. 1. When cross elasticity is more than 0 (Substitute goods) E c>0 2. When cross elasticity is less than 0 (Complimentary goods) E c<0 3. When cross elasticity is equal to 0 (Unrelated goods) E c=0 Elasticity of demand
- 10. References • Koutsoyiannis, A Modem Microeconomics, 2nd Edition, Macmillan Publication, Landon. • Salvatore, S., Managerial Economics, Mc Graw Hill Publications. • Dwivedi D N, Managerial Economics, Vikas Publishing House Pvt. Ltd, 2006 Elasticity of demand