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How
S Nehra
Demand
falls
S Nehra
By
ELASTICITY - TYPES
1.
3.
S Nehra
2.
S Nehra
ELASTICITY
S Nehra
Where
S Nehra
Demand
S Nehra
5
1. An
increase
in price... 4
Quantity
100
2. ...leaves the quantity demanded unchanged.
1. A 25% 5
increase
in price... 4
Demand
Quantity
90 100
2. ...leads to a 10% decrease in quantity.
1. A 25% 5
increase
in price... 4
Demand
Quantity
75
100
2. ...leads to a 25% decrease in quantity.
10
GREATER THAN 1
IS
Price
S Nehra
5
1. A 25%
increase
in price... 4
Demand
Quantity
50
100
2. ...leads to a 50% decrease in quantity.
11
PERFECTLY ELASTIC
DEMAND -ELASTICITY EQUALS
INFINITY
Price
S Nehra
1. At any price
above 4, quantity
demanded is zero.
Demand
4
2. At exactly 4,
consumers will
buy any quantity.
3. At a price below 4,
quantity demanded is infinite.
Quantity
12
S Nehra
13
DETERMINANTS OF PRICE
ELASTICITY OF DEMAND
S Nehra
14
S Nehra
If
15
REVIEW QUESTION
Cooking gas
Cigarettes
T.V.
Diamonds
Washing Machines
S Nehra
1.
16
S Nehra
17
S Nehra
18
S Nehra
Income Elasticity =
of Demand
Percentage Change
in Quantity Demanded
Percentage Change
in Income
19
3.
4.
5.
S Nehra
2.
20
S Nehra
21
S Nehra
22
S Nehra
23
S Nehra
24
IMPORTANCE OF ELASTICITY
1.
3.
4.
5.
S Nehra
2.
25
REVIEW QUESTION 1.
S Nehra
Explain WHY?
26
S Nehra
27
METHODS OF MEASUREMENT 1.
3.
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2.
Percentage Method
Total Expenditure Method
Geometrical / Point Method
28
PERCENTAGE METHOD
Ed =
S Nehra
29
S Nehra
30
Part
Price
Per kg.
(Rs.)
Quantity
Total
Value of price Relation
Demanded Expenditure elasticity
between price
(in kgs)
(Rs.)
and
Total
Expenditure
10
9
8
7
1
2
3
4
10
18
24
28
Greater
unity
than Inverse
II
6
5
5
6
30
30
Equal to unity
III
4
3
2
1
7
8
9
10
28
24
18
10
S Nehra
Constant
31
S Nehra
32