User:Meenakshi narayanaswamy/Topic Elasticity of demand/Concept Of Elasticity of demand

Alfred Marshall introduced the concept of elasticity in 1890 to measure the magnitude of the quantity demanded of a commodity to a certain percentage change in its price or the income of the buyer or in the prices of related goods .

Definition : Price Elasticity of demand is the degree of responsiveness of demand to a change in its price.In technical terms it is the ratio of the percentage change in demand to the percentage change in price.

Thus

Ep = Pecentage change in quantity demanded /Percentage change in price

From the definition it follows that when percentage change in quantity demanded is greater than

the percentage change in price then price elasticity will be greater than one and in this case demand is said to be elastic. when percentage change in quantity demanded is less than

the percentage change in price then price elasticity will be less than one and in this case demand is said to be inelastic. when percentage change in quantity demanded is equal to

the percentage change in price then price elasticity will be equal to one and in this case demand is said to be unit elastic.

Diagrammatic representation of elastic and inelastic demand curves

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