elasticity of demand.DOCVIP

introduction We have studied a host of demand determinants and how supply and demand curves act together to determine market equilibrium, and how shifts in these two curves are reflected in prices and quantities consumed and how. The change in these demand determinants brings about a change in the market demand for goods and services. Not all curves are the same, however, and the steepness or flatness of a curve can greatly alter the affect of a shift on equilibrium. Elasticity refers to the relative responsiveness of a supply or demand curve in relation to price: the more elastic a curve, the more quantity will change with changes in price. In contrast, the more inelastic a curve, the harder it will be to change quantity consumed, even with large changes in price. For the most part, Goods with elastic demand tend to be goods which arent very important to consumers, or goods for which consumers can find easy substitutes. Goods with inelastic demands tend to be necessities, or goods for which consumers cannot immediately alter their consumption patterns. Elasticity of demand measures the responsiveness of change in quantity demanded of a good because of change in prices. If a curve is more elastic, then small changes in price will cause large changes in quantity consumed. The concept of elasticity is used to mathematically and thus, precisely measure the changes in demand in quantitative terms. The demand depends upon various factors such as the price of a commodity, the money income of consumer the prices of related good the taste of the people etc.The elasticity of Demand measures responsiveness of quantity demanded to a change in any one of the above factors by keeping other factors constant. The term elasticity of demand measures the extent of changes in the quantity demanded of a given commodity as a result of the change in the demand in the determinant. If that is so, the types of demand elasticities must equal the number of demand determinants