Explain
Income Elasticity of demand
Cross Elasticity of Demand
Pls provides examples
Price elasticity of demand measures the percentage change in the quantity demanded of the good changes with the percentage change in the price of the own good.
Example: Suppose price of a good increase by 2% and the quantity demanded decreases by 4%, then the price elasticity is :
PED=(-)=4%/2%=(-)2
Price Elasticity will be 2.
Various types of price elasticity are:
Perfectly Elastic ( Ed=Infinity)
Even a small change in price will lead to an infinite demand.
Elastic( Ed>1)
(%change in the quantity demanded is greater than the %change in the price)
Unit Elastic(Ed=1)
(%change in the quantity demanded is same as % change in the price)
Inelastic( Ed<1)
(%change in the quantity demanded is lower than the %change in the price)
Perfectly inelastic( Ed=0)
(Any change in the price never changes the quantity)
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