2. What is Demand ?
 Demand is an economic principle that
describes a consumer’s desire backed by
the purchasing power and willingness to
pay a price for a specific good or service.
 Demand refers to how much (quantity) of
a product or service is desired by buyers.

3. What is Elasticity of
Demand ?
Elasticity of Demand refers to the degree of
responsiveness of quantity demanded to the
changes in the determinants of demand .
There are mainly 3 quantifiable
determinants of demand:-
 Price of the Good
 Income of the Consumer
 Price of the Related Goods

4. Types of Elasticity Of
Demand
There are three quantifiable determinants of
demand, Hence elasticity of demand can be
of three types
 Price Elasticity of Demand
 Income Elasticity of Demand
 Cross Elasticity of Demand

5. Price Elasticity of
Demand
 Price Elasticity of demand is the degree of
responsiveness of demand to a change in its
price .
 In technical terms it is the ratio of the
percentage change in demand to the
percentage change in price.
 Thus, Ep =Percentage change in quantity
demanded/Percentage change in price

6. Income Elasticity Of
Demand
 Income Elasticity of Demand measures the
responsiveness of the demand for a good to a
change in the income of the people
demanding the good
 It is calculated as the ratio of the percentage
change in demand to the percentage change
in income.

7. Cross Elasticity Of
Demand
 The Cross elasticity of demand or cross-price
elasticity of demand measures the
responsiveness of the demand for a good to a
change in the price of another good.
 It is measured as the percentage change in
demand for the first good that occurs in
response to a percentage change in price of
the second good.

8. Measurement of Elasticity
of Demand
 Percentage Method .
 Point Elasticity Method.
 Total Outlay Method.
 Arc Elasticity.

9. What is Supply?
 Supply is the quantity of some product
producers are willing to offer and are able to
sell at a given price at a given period all other
factors being held constant.
 Usually, supply is plotted as a supply curve
showing the relationship of price to the
amount of product businesses are willing to
sell.

10. What is Elasticity of
Supply?
 Responsiveness of producers to changes in the price
of their goods or services. As a general rule, if prices
rise so does the supply.
 Elasticity of supply is measured as the ratio of
proportionate change in the quantity supplied to the
proportionate change in price. High elasticity
indicates the supply is sensitive to changes in prices,
low elasticity indicates little sensitivity to price
changes, and no elasticity means no relationship
with price. Also called price elasticity of supply.


11. Types Of Elasticity of
Supply
 Perfectly Elastic Supply
 Perfectly Inelastic Supply
 Relatively Elastic Supply
 Relatively Inelastic Supply
 Unitary Elastic Supply

12. Perfectly Elastic Supply
 It is a case where a very slight change in
price causes an Infinite change in supply.
 A slight fall in prices brings quantity
supplied to zero.
 In such a case the supply curve runs
parallel to X -axis.
 The supply curve takes the shape of a
horizontal straight lit line

13. Perfectly Inelastic Supply
 The supply of a commodity is said to be
perfectly inelastic when the supply of
commodity is completely non-responsive to
changes in price.
 It is a case where quantity supplied remains
the same despite the change in price.
 A perfectly inelastic supply curve is a vertical
straight line which is parallel to OY-axis.

14. Relatively Elastic Supply
 The supply is relatively elastic when a given
change in price produces more than
proportionate change in quantity supplied.
 A doubling in price will result in more than
double the quantity supplied.

15. Relatively Inelastic Supply
 When a certain change in price causes a
smaller proportionate change in quantity
supplied of a Commodity, the supply is
said to be relatively less elastic.
 The percentage change in price is more
than the percentage change in quantity
supplied.

16. Unitary Elastic Supply
 A unitary-elastic supply indicates a good
with a supply-price elasticity of one.
 Which means that a 1% change in price
increases supply by 1%.