Essay: The Definition Of Elasticity Of Demands

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Classification of Demands
Elasticity of demand is an important variation on concept of Law of Demand. Demand can be classified as perfectly elastic, elastic, inelastic, unitary and perfectly inelastic. An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. An unitary demand is when quantity changes at the same rate as price.
1. Perfectly elastic demand
Perfectly Elastic demands are the demands where the slightest rise in price causes the quantity demanded of a commodity to fall to zero and at the present level of price people demand infinitely large quantity of the commodity. The coefficient of …show more content…

A fall in the price of electricity will result in the substantial increase in its demand.
5) Time: The elasticity of demand varies with the length of time. In general, demand is more elastic for longer period of time. For instance, if the price of kerosene rises, it may be difficult to substitute it with cooking gas within a very short time. But if sufficient time is given, people will make adjustments and use firewood or cooking gas instead of kerosene.
Elasticity of Demand
The elasticity of demand is measures the rate of response of quantity demanded due to a various factors, especially Price. In this report we are only considering the Elastic demands and the variable factor which involves money. Based on the assumption, ceteris paribus, there are different elasticity of demand where the responsiveness of quantity demanded is effected by the variation in factors like price, income and price of related goods.
1. Price Elasticity of Demand
The Price Elasticity of Demand (commonly known as just price elasticity) measures the rate of response of quantity demanded due to a price change. The formula for the Price Elasticity of Demand (Ep)

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