ELASTICITY OF THE DEMAND

                          ELASTICITY OF DEMAND 

E  Elasticity of demand shows that  how sensitive  the market is  , if the economics variable of some product changes than how it effects on its quantity  demand . Demand elasticity is calculated as percent change in quantity demanded to percent change in other economics variable . The higher the elasticity of demand for an economics variable means that consumers are more responsive . 

These variable are PRICE of the commodity , PRICE of the RELATED GOODS ,  INCOME of the consumers .

CONSIDER THE FOLLOWING SITUATIONS :

1. As a result of a fall in the price of radio from rupee 500 to 400 , the quantity demand increases from 100 radio to 150 . 

 

2. As a result of fall in the price of wheat from rupee 20 per kilogram to 18 per kilogram ,the quantity demanded increases from 500 kilogram to 520 kilogram .

interpretation of demand elasticity

Elasticity of demand measured in absolute term . 

If elasticity of demand is greater than 1 , then it is elastic .

If elasticity of demand is less than 1 , then it is inelastic .

If the elasticity of demand is equal to 1 , then it is unitary .