Elasticity – Very Short Questions | Microeconomics | Pokhara University

Elasticity
Very Short Questions | Microeconomics
BBA | BBA-BI | BBA-TT | BCIS
Management Notes

Elasticity of demand:
The elasticity of demand is the measure of responsiveness of demand for a commodity to the change in any of its determinants like price of the same commodity,price of the related commodity,income of the consumer,etc.

Types of elasticity of demand:
There are three types of elasticity of demand.They are:

• Price elasticity of demand(Ep)
• Income elasticity of demand(Ey)
• Cross elasticity of demand(Ec)

Price elasticity of demand:
Price elasticity of demand is the measure of the degree of responsiveness of quantity demanded for a commodity to the change in its price.

Types of price elasticity of demand:
The types of price elasticity of demand are as follows:

• Perfectly elastic demanded(Ep=infinity)
• Relatively elastic demand(Ep>1)
• Unitary elastic demand(Ep=1)
• Relatively inelastic demand(Ep<1)
• Perfectly inelastic demand(Ep=0)

Four determinants of price elasticity of demand:
The main determinants of price elasticity of demand are as follows:

• Nature of commodity
• Substitute
• Goods having several uses
• Income of the consumer

Income elasticity of demand:
Income elasticity of demand shows the degree of responsiveness of quantity demanded for a good to the change in the income of the consumer.

Three degrees of positive income elasticity of demand:
There are three degrees of positive income elasticity of demand.They are:

• Unitary Income elasticity of demand (Ey=1)
• Less than Unitary Income elasticity of demand (Ey>1)
• More than Unitary Income elasticity of demand (Ey<1)

Cross elasticity of demand:

The cross elasticity of demand is defined as the percentage change in the quantity demanded for X resulting from a percentage change in the price of Y .

Cross elasticity of demand of pens with respect to change in price of motor cars is:

Cross elasticity of demand in case of independent good like pens and motor cars is zero. It means there is no effect on the demand for pens with respect to the change in price of motor cars.

Types of cross elasticity of demand:

There are three types of cross elasticity of demand:

• Positive cross elasticity of demand (Ec>0)
• Negative cross elasticity of demand (Ec<0)
• Zero cross elasticity of demand (Ec=0)

Elasticity of supply.

The elasticity of supply measures the degree of responsiveness of quantity supplied of a commodity to the change in its price .

Types of price elasticity of supply:

The types of price elasticity of supply are as follows:

• Perfectly elastic supply (Es=infinity)
• Relatively elastic supply (Es>1)
• Unitary elastic supply (Es=1)
• Relatively inelastic supply (Es<1)
• Perfectly inelastic supply (Es=0)

Determinants of price elasticity of supply.
The main determinants of price elasticity of supply are as follows:

• Nature of the commodity
• Cost of production
• State of technology
• Time period