ELASTICITY OF DEMAND
Elasticity of demand may be defined as the ratio of the percentage change in demand to the percentage change in price.
Ep= Percentage change in amount demanded
Percentage change in price
TYPES OF ELASTICITY DEMAND
Price elasticity of demand
Income elasticity of demand
Cross elasticity of demand
Eba= percentage change in the quantity demanded of B/ percentage change in price of A
TYPES OF PRICE ELASTICITY OF DEMAND
Perfectly elastic demand: Where no reduction in price is needed to cause an increase in quantity demanded. This is explained with the help of a diagram.
Perfectly in elastic demand: Here a large change in price causes no change in quantity demanded. It is zero elastic demand [E=0]. This is explained with the help of a diagram.
Unitary elastic: Where a given proportionate change in price causes an equally proportionate

change in quantity demand. This is explained with the help of a diagram.
Relatively elastic: Where a small change in price causes a more than proportionate change in quantity demanded. The price elasticity of demand is greater than unity [E >1]. This is explained with the help of a diagram.
Relatively inelastic demand: Where a change in price causes a less than proportionate change in quantity demanded. The price elasticity of demand is lesser than unity [E <1]. This is explained with the help of a diagram.
TYPES OF INCOME ELASTICITY OF DEMAND
Positive and elastic income demanded: The value of the coefficient E is greater than unity , which means that quantity demanded of good X increases by a larger percentage than the income

of the consumer. This is explained with the help of a diagram.
Positive but inelastic income de mand: It is low if the relative change in quantity demanded is less than the relative change in money income. Ey<1. This is explained with the help of a diagram.
Unitary income elasticity of demand: The percentage change in quantity demanded is equal to the percentage change in money income. This is explained with the help of a diagram.
Ze ro income elasticity: A change in income will have no effect on the quantity demanded.
The value of the coefficient Ey is equal to zero. This is explained with the help of a diagram.

Infe rior goods: Inferior goods have negative income elasticity of demand. It explains that less is bought at higher incomes and more is bought at lower incomes. The value of the coefficient
Ey is less than zero or negative in this case. This is explained with the help of a diagram.
DIFFERENT TYPES OF CROSS ELASTICITY OF DEMAND
CROSS ELASTICITY OF SUBSTITUTES: In case of substitutes, as the price of one good increases the demand for the other good also increase at the same time.
Relatively elastic: Where a small change in price of good A causes a large change in quantity demanded of good B. The elasticity of substitutes is greater than unity [E >1].This is explained with the help of a diagram.
Relatively inelastic demand: Where a large change in price of good A causes a small change in quantity demanded of good B. The elasticity of substitutes is lesser than unity [E <1]. This is explained with the help of a diagram.

Unitary elastic: Here a given proportionate change in price causes an equally proportionate change in quantity demand. This is explained with the help of a diagram.
Perfectly in elastic demand: Here a large change in price causes no change in quantity demanded. It is zero elastic demand [E=0]. This is explained with the help of a diagram.
Unrelated goods: If two goods are not at all related then they have negative elasticity of demand. This is explained with the help of a diagram.
CROSS ELASTICITY OF COMPLIMENTARY GOODS: In case of complimentary goods, as the price of one good increases the demand for the other good decreases at the same time.
Perfectly elastic demand: Where no reduction in price is needed to cause an increase in quantity demanded. This is explained with the help of a diagram.

Perfectly in elastic demand: Here a large change in price of good B causes no change in quantity demanded of good B. It is zero elastic demand [E=0]. This is explained with the help of a diagram.
Unitary elastic: Where a given proportionate change in price causes an equally proportionate change in quantity demand. This is explained with the help of a diagram.
Relatively elastic: Where a small change in price of good B causes a more than proportionate change in quantity demanded of good A. The price elasticity of demand is greater than unity [E
>1].This is explained with the help of a diagram.
Explanation: The figure shows that there is a small decrease in price from a to a1, but it has resulted in a large increase in quantity demanded from b to b1. It is also known as relatively elastic demand.
Relatively inelastic demand: Where a change in price causes a less than proportionate change in quantity demanded. The price elasticity of demand is lesser than unity [E <1]. This is explained with the help of a diagram.

DIFFERENT METHODS OF MEASURING ELASTICITY OF DEMAND
Total outlay: According to this method, we compare the total outlay of the purchases or total revenue, i.e, total value of sales from the point of view of the seller before and after the variations in price. This is explained with the help of a diagram.
Point elasticity: The concept of price elasticity can be used in comparing the sensitivity of the different types of goods e.g., luxuries and necessaries) to changes in their prices. The elasticity of demand is always negative because change in quantity demanded is in opposite direction to the change in price that is a fall in price is followed by rise in demanded and vice versa hence elasticity less than zero.
Arc elasticity: Arc elasticity is a measure of the average responsiveness to price changes exhibited by a demand curve over some finite stretch of the curve. This is explained with the help of a diagram below.