Types of Elasticity of Demand

  1. A)Price elasticity of demand:

The proportionate change in quantity demanded of commodity with respect to the proportionate change in it’s price is price elasticity of demand.   Mthematically:

The price elasticity of demand also can be sub categorized under the following sub topics:

i)Relatively elastic demand  (Ep>1)

The small proportionate change in price bring about the greater proportionate change in quantity demanded is relatively elastic demand. Here, the proportionate change in  demand is greater than the proportionate change in price. The following figure shows the relatively elastic demand.

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ii)Relatively inelastic demand (Ep<1)

The greater proportionate change in price brings smaller proportionate change in quantity demanded is relatively inelastic demand. Here the proportionate change in  price is greater than the proportionate change in quantity supplied. This case is applicable in basic or necessary goods/inferior goods.

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iii)Unitary elastic demand (Ep=1)

The proportionate in price bring the equal proportionate change in quantity demanded is unitary elastic demand. Here, the proportionate change in price and the proportionate in quantity demanded is equal.

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iv)Perfectly elastic demand (Ep=∞)

The slight or negligible change in price bring great proportional change in quantity demand is perfectly elastic dmand. It is not applicable in real world.

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v)Perfectly inelastic demand

The great proportional change in price bring no change in quantity demanded, is perfectly inelastic demand. Here the demand remains constant whatever be the change in it’s price. Thus the demand curve is parallel to Y-axis.

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B)Inchange income elasticity of demand:

The proportionate change in quantity demand due to the change in income of the consumer is income elasticity of demand. Here, only the proportionate change in change in income of consumer  derivates the change in quantity demanded, where other things remaining constant. Mathematically:

The income elasticity of demand can also be described under the following sub topics:

i)Positive income elasticity      (Ey>0)

The proportionate increase in quantity demanded due to the certain proportionate increase in income  of consumer, is positive income elasticity of demand. Here the relationship between proportionate change quantity demanded and the income of the consumer is positive, where other things remaining the same. It is applicable in case of normal goods/superior goods.

 

ii)Negative income elasticity   (Ey<0)

The proportionate increase in quantity of commodity due to yhe proportionate decrease in income of the consumer and vice versa. Here, the relationship between proportionate change between income and quantity demanded is negative.
iii)Zero income elasticity

The proportionate change in income doesn’s make any impact in quantity demanded, is said to be zero income elasticity. Here the quantity demand remains constant whatever the derivation be in income of consumer.
C)Cross elasticity of demand

The proportionate change in quantity demanded of X commodity due the proportionate change in price of related Y commodity, is cross elasticity of demand.

Mathematically:

The cross elasticity of demand can be further can be sub-classified under the following topics:

i)Positive cross elasticity

The proportionate increase in quantity demanded of X commodity due to the proportionate increase in price of Y commodity is said to be positive cross elasticity. It is applicable in case of subsititious goods i.e: tea, coffee, coke, pepsi etc.
ii)Negative cross elasticity

The proportionate decrease in quantity demand of X commodity due to the proportionate increase in price of Y commodity & vice versa is said to be negative cross elasticity. It is applicable in case of complimentary goods i.e car & petrol, pen & ink etc.

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