Elasticity of Demand — Chapter Summary
ICSE · Class 12 · Economics
Summary of Elasticity of Demand for ICSE Class 12 Economics. Part of the ICSE Class 12 Economics syllabus. Elasticity of demand measures how strongly.
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Overview
Elasticity of demand measures how strongly quantity demanded changes when price, income, or the price of another related commodity changes. Price elasticity is the main part of the chapter and it ranges from zero to infinity. Demand can be perfectly inelastic, inelastic, unit elastic, relatively ela
Key Concepts
Price elasticity of demand shows
Price elasticity of demand shows the responsiveness of quantity demanded to a change in price. It differs from commodity to commodity and from person
When quantity demanded does not change
When quantity demanded does not change at all with a change in price, demand is perfectly inelastic and Ed = 0. The demand curve is vertical and paral
When a large change in price
When a large change in price causes a smaller percentage change in demand, demand is inelastic and Ed < 1. Necessary goods such as foodgrains, vegetab
When percentage change in demand
When percentage change in demand is equal to percentage change in price, Ed = 1. The demand curve is a rectangular hyperbola, and total expenditure re
When percentage change in demand
When percentage change in demand is much greater than percentage change in price, Ed > 1. Demand is highly responsive to price change.
Learning Objectives
- Understand the meaning of elasticity of demand
- Differentiate between the five degrees of price elasticity
- Learn the methods of measuring price elasticity of demand
- Use formulas to calculate elasticity in numerical problems
- Understand income elasticity and cross elasticity
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