Small Presentation on Elasticity

1. Elasticity??? What and Why?

5. How to do? E p = ------- ÷ ------- = ----- x ----- ∆ Q ∆ P Q P ∆ Q ∆ P P Q Where Q = Original quantity demand P = Original Price ∆ Q = New Quantity demanded – Original quantity demanded ∆ P = New Price – Original Price

6. Problem: The price of product Bread is Rs. 20/-, quantity demanded is 1000 packets and the price increased from Rs. 20/- to Rs. 30/-, the quantity demanded is decreased from 1000 packets to 850 packets. E p = ------- x ----- = ----------- x ------- ∆ Q ∆ P P Q 850-1000 20 30-20 1000 E p = -0.3 E p < 0 - Relatively inelastic in nature as there is slight variation in demand even though there is rise in price