Meaning and Definition of

Elasticity of Demand
 Law of demand explains that the demand of a commodity
increases on a fall in its price and decreases on an increase
in its price. This law indicates only the direction of change in
the quantity demanded of a commodity in response to a
change in its price, but it does not tell the extent to which
the quantity demanded of the commodity will change in
response to a certain change in its price. This information is
provided by the concept of elasticity of demand.

 Elasticity of demand is the measurement of change in the

quantity demanded of a commodity in response to a certain
change in its price, the term ‘Elasticity of Demand’ has been
defined by Prof.Marshall as “The elasticity of demand in a
market is great or small according to as the amount
demanded increases much or little for a given fall in price
and diminishes much or little for a given rise in price.”
Concepts of Elasticity of Demand
 Price Elasticity of Demand-Price
elasticity of demand expresses
relationship between change in the
quantity demanded of a commodity
and a proportionate change in its
price.
 Income Elasticity of Demand-
measures changes in the quantity
demanded of a commodity in relation
to the changes in income of
consumers. It can be defined as
proportionate change in the quantity
demanded of a commodity in relation
to a proportionate change in income
of a consumer.
Cross Elasticity of Demand-
 Cross Elasticity of Demand measures a change
in the quantity demanded of a particular
commodity in response to a change in the
price of some related commodities. It can
be defined as proportionate change in the
demand of commodity X in response of a
proportionate change in the price of a
related commodity Y.
 There are two forms of Cross elasticity of
demand: Cross elasticity in respect of
complementary goods and Cross elasticity
of demand in respect of substitute goods.
Types of elasticity of demand
 Demand of certain commodities is more
elastic (a little change in the price of such
commodities bring more change in their
demand). While the demand of some
commodities is less elastic (change in the
demand of such commodities is less in
proportion to the change in their price).
Since the elasticity of demand of different
commodities is different, we can study the
elasticity of demand by dividing into five
types. It is to remember in this regard that
by the word ‘elasticity of demand’ here, we
mean only the ‘price elasticity of demand’.
 Perfectly Elastic Demand.
 Highly Elastic Demand.
 Elastic Demand.
 Less Elastic Demand or Inelastic
Demand.
 Perfectly Inelastic Demand.