Elasticity Of Demand

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Demand is the amount of an economic good or service that a consumer or a group of consumers are willing to purchase from the market at a given price at a given point of time. An individual's demand for a commodity depends on various factors, such as, the price of the commodity, the consumer's income, the price of related (i.e. complementary and substitute) goods, tastes and preferences of the consumer, etc. Usually, when the prices of the commodities fall, consumers are tempted to purchase more, and when the prices rise, the quantity demanded decreases. There is, thus, an inverse relationship between the price of the product and the quantity demanded. The economists have named this inverse relationship between demand and price as the law of demand. The law of demand states that consumers buy more of a good when its price decreases and less when its price increases (ceteris paribus ), other factors affecting demand kept constant. That is, if the income of the consumer, prices of the related goods, and tastes and preferences of the consumer remain unchanged, the consumer’s demand for the good will move opposite to the movement in the price of the good. The law of demand can be graphically depicted by a downward sloping demand curve: The graph clearly shows that at a higher price (P1), the quantity demanded is less (Q1). When price falls (P2), the quantity demanded increases (Q2), and so on. ELASTICITY OF DEMAND What is 'Elasticity'? Literally, 'elasticity' means 'flexibilty'. In economics, elasticity is measure of responsiveness of dependent variable to the change in independent variable. It is expressed as the ratio of the percentage change in dependent variable to the percentage change in independent variable. What is Elasticity of Demand? Elasticity of demand can be defined as the degree of responsiveness of demand(dependent variable) to changes
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