PowerPoint Presentation On Elasticity

PPT On Elasticity
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Elasticity Presentation Transcript:
1. Meaning of elasticity
Elasticity of Demand refers to the degree of responsiveness of quantity demanded to the changes in the determinants of demand  Law of demand will tell you the direction i.e. it tells you which way the demand goes when the price changes. But the elasticity of demand tells you how much the demand will change with the change in price to demand to the change in any factor. 2. Types of elasticity 1. Price Elasticity of Demand

2. Income Elasticity of Demand
3. Cross Elasticity of Demand

3. Price Elasticity of Demand
PED is a measure of the responsiveness of demand to changes in the commodity’s own price Algebraically , it is the percentage change in quantity demanded divided by the percentage change in price. Percentage Change in Qty Demanded Percentage Change in price

 4. Price Elasticity of Demand-types
Price Elasticity of Demand is the degree of responsiveness of demand to the change in price of that commodity. Types- Perfectly inelastic demand (ep = 0) Inelastic (less elastic) demand (e < 1) Unitary elasticity (e = 1) Elastic (more elastic) demand (e > 1) Perfectly elastic demand (e = ∞)

5. Types of elasticity
E =α Indifinite demand at a given price Curve is horizontal straight line Here Demand is said to be perfectly elastic

6. Types of elasticity
E =1 A proportionate change in price is accompanied by the same proportionate change in quantity demanded of the good. Here the demand is said to be unitary elastic.

7. Types of elasticity
E =0 No change to change in price Curve will be a vertical straight line. This is referred as perfectly inelastic

8. Types of elasticity
E>1 A change in price is accompanied by a greater percentage change in demand Curve is gradually sloping. It is also referred as relatively elastic

9. Types of elasticity
E <1 br="">A change in price is accompanied by a less than percentage change in demand
Curve is steeply sloping.
It is also referred as relatively inelastic

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PowerPoint Presentation On Demand

PPT On Demand
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Demand Presentation Transcript:
1. Demand curve
The demand curve is a graphic representation of the demand schedule. It slopes downward from left to right and it shows the inverse relationship between price of x and qty demanded of good x

2. Quantity demanded vs. change in demand
Quantity demanded is the amount (number of units) of a product that a household would buy in a given time period if it could buy all it wanted at the current market price. There is difference between change in demand and change in quantity demanded. Quantity demand changes as result of changes in price whereas change in demand takes place because of change in factors other than price. Quantity demand-is represented by “expansion or contraction "whereas change in supply is often referred to as “increase or decrease” in demand Quantity demanded is represented by different points on same graph whereas change in demand often results in shift of curve.

3. From Household to Market Demand
Demand for a good or service can be defined for an individual household, or for a group of households that make up a market. Market demand is the sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service.

4. From Household Demand to Market Demand
Assuming there are only two households in the market, market demand is derived as follows:

5. Law of Demand
An increase in the price of a particular good (x) is accompanied by a fall in the quantity demanded of that particular good (x) ceteris paribus; A fall in the price of good (x) is accompanied by a rise in the price of good (X), ceteris paribus. Ceteris paribus or caeteris paribus is a Latin phrase, literally translated as "with other things the same," or "all other things being equal or held constant. There are two factors that explain this relationship: As the price of a good increases, consumers will substitute into other goods (substitution effect); .As the price of a good increases, consumers will have less real income to purchase all goods (income effect).

6. Inverse Relationship
From the law of demand , we can conclude that there is an inverse relationship between quantity demanded of good (x) and the price of good (x). The demand curve should be a negatively sloped demand curve.

7. Assumptions of law of demand
No change in consumers income, consumer preference,fashion,price of related goods, government policy, weather conditions No expectation of future price change No demographic changes No change in range of goods available

8. Factors affecting Demand
The factors affecting demand can be subdivided into two main categories: Movement along the Demand Curve Shift of the Demand Curve

9. Movement along the Demand Curve
There is only one factor that cause a movement along the demand curve and that factor is price

10. For more please refer our PPT. Thanks.