What is meant by Elasticity of demand ?
The measure of change in the quantity demanded of a commodity due to change in its price,consumer's income and price of related goods is called elasticity.
Factor Affecting price Elasticity of Demand
i) Nature of commodity
ii) Miscellaneous consumption
iii) Habits of consumption
iv) Price level
Nature of commodity
•When a commodity is a necessity like food grains, vegetables,medicines,etc.,its demand is generally inelastic.
•When a commodity is a comfort like fan,refrigerator,etc.,its demand is generally elastic as consumer can postpone its consumption.
•When a commodity is a luxury like AC,DVD Player,etc.,its demand is generally more elastic as compared to demand for comforts.
various consumption
The demand for goods that have different uses is elastic.
For example,electricity is used for lighting,heating a room,cooking food,etc,if the price of electricity increases,then it will be used only for important works.
Consumer Habits
The demand for goods which are habitual to the consumers is elastic.
For example,there is no decrease in the demand for cigarettes and tobacco,no matter how high taxes are imposed on them.
Price level
The elasticity of demand also depends on the price level of the commodity.The elasticity of demand will be greater at a higher at a higher level of the price of the commodity and less at a lower level of the price.
Measure of prices elasticity of Demand
