Notes

Elasticity of demand
Chapter 8
Meaning of elasticity of demand
With a change in price of a commodity the price of other goods and the consumer income is relative change in quantity of the commodity demanded is called elasticity of demand the formula
The formula percentage change in quantity demanded divided by percentage change in price
Types of elasticity of demand
Elasticity of demander can be of three types
Price elasticity of demand
Elasticity of demand

Degrees of crisis elasticity of demand
Perfectly elastic demand next time
UK there is no change in cries housing and enormous variation in demand of the commodities is called perfectly elastic demand it is an extreme condition ed equals to Infinity
Perfectly inelastic demand when there is no change in demand in spite of substantial increase or decrease in price it's called perfectly inelastic demand
Relatively elastic demand
Situation in which at any change in price brings about substantially higher change into quantity demand for example the price is decreased by 20% quantity demanded is increased by 50% the goods which are not essential which are luxurious normally have in high elasticity demand like air conditioner luxury car in case of Ed less than one
Elastic demand when the extension or contraction in quantity demanded is equal prakash proportional to price changes it is in case of unity elastic demand and demand for commodities of comforts electric fan umbrella raincoat belong to this class suppose price is increased for 20% quantity demanded will also decrease hope 20%
Relatively inelastic demand when there is substantial change in crisis has little effect on extension contraction of demand of commodities known as relatively inelastic demand
Factors affecting elasticity of demand
Nature of commodity nets line
The demand of items of necessity is generally elastic such commodities are brought in certain fixed quantities irrespective of their prices demand for wheat and rice will practically be the same in some greater demand for items comforts are relatively inelastic whereas for luxuries demands are elastic in high proportions
Proportion of total expenditure involved
The expenditure made for a particular commodity is a small portion of total expenditure the demand will generally be inelastic it's now the consumer will not be affected by the change in demand of the commodity will not be altered the newspaper and Matchbox belong to such type of commodity
Availability of substitutes
For which the other substitutes are available in the market have elastic demands compared to commodities without available substitutes
We focused use of commodity if a commodity can be used for different purposes the demand is generally elastic compared to this the commodity having one number uses is INelastic

Multipocious use of commodity next 94 commodity can be used for several purposes its demand is entity elastic as compared to this for the commodity many types of uses and its price rises we will get encouraged to use it less
Neville next 9 the price of a commodity is very higher very low to generally elastic the price is elastic carter is a 2,00,000 has a change of 500 will longness and no effect on its demand needle short buttons are cheap commodities even if 100% price changes it will have no effect on demand
Habit taste and customs of people some people have a habit of a particular type or variety of commodity of preferential tastes like personal smokes is addicted to it or a person who is an alcoholic will buy alcohol even if the price goes HIGHER