Types of elasticity of demand with examples

types of elasticity of demand with examples

The elasticity of demand is the degree of responsiveness of such a quantity of the commodity.

which is a demand by a consumer for a change in any of its determinants. 

Various factors are affecting the elasticity of demand that needs to be taken note of for help in homework or assignment help:

Availability of substitutes:

Commodity with more and close substitutes leads to having an elastic demand but commodities with few and weak substitutes have a low elasticity of demand. 

Nature of the commodity: Any necessary commodity has inelastic demand whereas luxuries and comforts have inelastic demand because demand changes with the price change.

The portion of income spent: The larger the portion of the income spent on commodity, the larger will be elasticity whereas the smaller the income spent, the smaller will be the elasticity.

Time factor: Elasticity of demand is less for those commodities which have less usage period or which are non-durable and any commodity which has more usage period or which are less durable have inelastic demand.

Habit: The demand for a commodity tends to be high or elastic for which a consumer is unhabitual and the demand for a commodity will be low or inelastic for which a consumer is habitual. For example, cigarettes.

There are different types of elasticity of demand, which need to be noted while taking help in homework. They are as follows:

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of such a quantity of the commodity which is demanded due to the change in its price.

Degrees of Price Elasticity: –

Perfectly inelastic demand: The elasticity of demand is zero when the quantity of a commodity that is demanded does not respond to a change in its price. The demand for life-saving medicines is perfectly inelastic.

Perfectly elastic demand: The price elasticity of demand for a commodity is said to be infinite when the consumers are ready to purchase all that they can get at a specific price but not at all at a higher price.

Unitary elastic demand: The price elasticity of demand is said to be unitary when an equivalent percentage change in the quantity demanded is caused due to a given percentage change in the price of a commodity.

Elastic demand: The elasticity of demand is greater than unitary when the percentage change in the quantity of a commodity that is demanded is more than the percentage change in its price.

Inelastic demand: When the percentage change in the quantity of a commodity that is demanded is less than the percentage change in its price, then the elasticity of demand is inelastic. 

Income elasticity of demand: This type of elasticity is used to measure the degree of responsiveness of the quantity of a commodity that is demanded to a change in the consumers’ income.

Types of Income Elasticity of Demand: –

Positive Income Elasticity: Income elasticity of demand is positive only when an increase in income leads to an increase in quantity demanded of a commodity it is found in normal goods. Income elastic  is classified into three categories:

Income elastic: The elasticity is said to be income elastic when the percentage change in the quantity of a commodity that is demanded is greater than the percentage change in income. For example, luxuries.

Income inelastic: Elasticity is said to be income inelastic if the percentage change in the quantity of a commodity that is demanded is less than the percentage change in income. For example, necessities like foods, clothes, soap, etc.

Unitary income elasticity: Elasticity is said to be unitary if the percentage change in the quantity of a commodity that is demanded is equal to the percentage change in income. Unitary income elasticity shows us the dividing line between the income elastic and income inelastic.

Negative income elasticity:

When an increase in income of consumers results in the fall in the quantity of a commodity that is demanded and a fall in the income results in the rise of quantity demanded of a commodity, then the income elasticity is said to be negative. It is found in inferior goods like maize, bajra, etc. It has an inverse relationship.

Zero income elasticity: Income elasticity is said to be when the rise in income of a consumer does not affect the quantity of a commodity. It is found in goods like salt and matchbox.

Cross elasticity of demand: Cross elasticity of demand is defined as the degree of responsiveness of change in the quantity of a commodity that is demanded due to a change in its prices of related goods.

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Types of cross elasticity of demand: –

Positive cross elasticity of demand: When rising in the price of one commodity results in an increase in demand of related commodity and on the other hand, the fall in the price of one commodity results in a decrease in demand of the related commodity, then the cross elasticity of demand is said to be positive. It is found in substitute goods like tea and coffee.

Negative cross elasticity of demand: If the fall in the price of one commodity results in an increase in demand of related commodities and contrarily, a rise in the price of commodity results in to fall in demand of the related commodities, then the cross elasticity of demand is said to be negative. It is found in complementary goods like cars and fuel. 

Zero cross elasticity: When a change in the price of one commodity does not affect the demand of another commodity, then the cross elasticity is said to be zero. A zero-cross of demand exists between two goods when they are not related with each other. For example, cars and television, etc.

these are the two important concepts while studying economy. The above-mentioned points are the basics behind these concepts and sufficient to offer assignment help for the same.

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