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WEEK 4

ELASTICITY OF DEMAND

Content

1. Elasticity of Demand
2. Measurement of elasticity of demand
3. Worked Examples
4. Factors Determining Elasticity of Demand

Sub-topic One:  Elasticity of Demand

This measures the degree of responsiveness of quantity of a commodity demanded to changes in the price of the commodity or to changes in income or taste of the consumer or to changes in prices of other commodities.  This definition breaks down the various segments in which elasticity of demand will be examined:

Types of Elasticity of Demand

1. Price Elasticity of Demand
2. Income Elasticity of demand
3. Cross Elasticity of Demand

Price Elasticity of Demand

This measures the degree of responsiveness of demand for a particular commodity to a small change in the price of such commodity.  Price elasticity of demand is often called the ‘Elasticity f Demand’

The formula for Price Elasticity of Demand is:

Ed = ^{Percentage Change in Quantity Demanded}/ _{Percentage change in Price} = ^%∆φd / _%∆ρ

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