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प्रश्न
Explain price elasticity of demand.
Explain Price Elasticity of Demand. Draw the various degrees of it with diagrams.
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उत्तर
Price Elasticity of Demand (PED) examines how sensitive the quantity looked for of a commodity is to a change in its price while maintaining all other factors constant.
`E_p = ("% Change in Quantity Demanded")/("% Change in Price")`
`E_p = (DeltaQ"/"Q)/(DeltaP"/"P)`
where:
- Ep = Price Elasticity of Demand
- ΔQ = Change in Quantity Demanded
- ΔP = Change in Price
- Q = Initial Quantity Demanded
- P = Initial Price
Degrees of Price Elasticity of Demand:
- Perfectly Elastic Demand: The quantity demanded changes infinitely in response to a very slight change in price. For example, Highly competitive markets for identical products.
- Horizontal demand curve.
- Infinite responsiveness to price changes.
- Perfectly inelastic Demand: The quantity demanded remains constant, regardless of changes in prices. For example, life-saving drugs and essential goods such as salt.
- Vertical demand curve.
- Zero responsiveness to price changes.
- Unitary Elastic Demand: Percentage change in quantity demanded is exactly equal to the percentage change in price. For example, certain everyday goods.
-
Demand changes exactly in proportion to price changes.
-
- Relatively Elastic Demand: Percentage change in quantity demanded is greater than the percentage change in price. For example, luxury goods, electronics.
- High responsiveness to price changes.
- Relatively Inelastic Demand: Percentage change in quantity demanded is less than the percentage change in price. For example, necessities like milk and water.
- Low responsiveness to price changes.
Notes
Students should refer to the answer according to the question.
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संबंधित प्रश्न
Income elasticity of demand for inferior goods is negative.
Price elasticity of demand of goods X is -2 and goods Y is -3. Which of the two goods is more price elastic and why?
The price elasticity of demand for a good is - 0.4. If its price increases by 5 percent, by what percentage will its demand fall? Calculate.
What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b)-1, (c)-2.
A consumer spends Rs 100 on a good priced at Rs 4 per unit. When its price falls by 25 percent, the consumer spends Rs 75 on the good. Calculate the price elasticity of demand by the Percentage method.
When the price of a good falls from Rs 10 to Rs 8 per unit, its demand rises from 20 units to 24 units. What can you say about price elasticity of demand of the good through the expenditure approach?
A consumer buys 27 units of a good at a price of Rs 10 per unit. When the price falls to Rs 9 per unit, the demand rises to 30 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
Discuss any four factors affecting price elasticity of demand.
A consumer spends Rs 200 on a good priced at Rs 5 per unit. When the price falls by 20 percent, he continues to spend Rs 200. Find the price elasticity of demand by percentage method.
A consumer spends Rs 400 on a good priced at Rs 4 per unit. When the price rises by 25 percent, the consumer continues to spend Rs 400. Calculate the price elasticity of demand by percentage method.
A consumer buys 10 units of a commodity at a price of Rs. 10 per unit. He incurs an expenditure of Rs 200 on buying 20 units. Calculate price elasticity of demand by the percentage method. Comment upon the shape of demand curve based on this information.
Define or explain the following concept.
Unitary elastic demand.
State whether the following statement is True or False :
Concept of elasticity of demand is useful for finance minister.
What is the elasticity of demand?
Fill in the blanks with appropriate alternatives given in the bracket.
Demand elasticity can be measured from demand curve by ___________ method.
What do you mean by substitutes? Give examples of two goods which are complements of each other.
The demand for salt is ______.
State whether the following statement is TRUE and FALSE.
Perfectly inelastic demand curve is parallel to the X axis.
State whether the following statement is TRUE and FALSE.
Unitary Elastic Demand rarely occurs in practice.
Define the following concept:
Cross Elasticity of Demand
Draw a diagram to show the elasticity of demand when it is greater than one.
Define price elasticity of demand.
State whether the following statement is true or false. Give valid reasons in support of your answer.
The coefficient of price elasticity of demand for the commodity is inversely related to the number of alternative uses of the commodity.
Give economic term:
Elasticity resulting from infinite change in quantity demanded.
- Assertion (A): Elasticity of demand explains that one variable is influenced by another variable.
- Reasoning (R): The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
If quantity supplied increases by 60% due to a 50% increase in price, then elasticity of supply is ______
Identify the correctly matched pair from the items in Column A by matching them to the items in column B:
| Column A | Column B |
| 1. Increase or decrease in demand for a commodity does not cause any change in its price. | (a) Effect on supply, in the case of Perfectly Elastic Demand. |
| 2. Increase or decrease in demand causes a change in the price of the commodity. Equilibrium quantity remains constant. | (b) Effect on demand, in the case of Perfectly Inelastic Supply. |
| 3. Increase or decrease in demand cause a change in the price of the commodity. Equilibrium quantity remains constant. | (c) Effect on demand, in the case of Perfectly Elastic Supply. |
| 4. Increase or decrease in demand for a commodity does not cause any change in its price. | (d) Effect on supply, in the case of Perfectly Elastic Demand. |
Identify the correctly matched pair from the items in Column A by matching them to the items in Column B:
| Column A | Column B | ||
| 1 | Relatively Inelastic Demand | (a) | ed > 1 |
| 2 | Relatively Elastic Demand | (b) | ed < 1 |
| 3 | Perfectly Inelastic Demand | (c) | ed = 0 |
| 4 | Perfectly Elastic Demand | (d) | ed = 1 |
Study the following table and answer the questions:
| Price of Pen (₹) | Demand for Pen |
| 10 | 500 |
| `square` | 400 |
| 30 | `square` |
| `square` | 200 |
| 50 | `square` |
Questions:
- Complete the above table.
- Which type of relationship is found between the price of a pen and demand for the pen?
Assertion (A) : A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
What is meant by elastic demand?
Which type of good typically has inelastic demand?
What is unit elasticity of demand?
