elasticity of demand

Elasticity of demand : Elasticity of demand Elasticity of demand refers to the responsiveness of quantity demanded of a commodity in relation to the change in its price. Explanation it means that in chapter demand we have already studied that demand is affected by change in its price ok.but the concept of elasticity explains what is the magnitude of that change.i.e it helps us to find out the exact value of change.it shows how demand responses to price.

Now lets study what is price elasticity of demand? : Now lets study what is price elasticity of demand? Actually when we measure the change in quantity demanded in relation to its price it is called price elasticity of demand. Definition :price elasticity of demand measures percentage change in the quantity demanded of a commodity in response to the percentage change in its price it is represented as Formula:%change in quantity demanded /%change in price ok

Ways of measuring elasticity : Ways of measuring elasticity There are 3 ways of measuring elasticitynamely Total expenditure meathod Proportionate meathod Geometric/point meathod Today we will study only total expenditure meathod ok

Total expendiure meathod : Total expendiure meathod In this meathod we calculate the elasticity by studying how the changes in price effect the total expenditure ok There are 3 possible situations : 1)if due to rise or fall in price total expenditure remains constant .we say elasticity of demand(Ed) is one.the following can be shown as : In the above table when price falls TE REMAINS CONSTANT HENCE ELASTICITY IS =1