1. Elasticity of Demand

2. Elasticity of Demand
Response of quantity demand to any change in price.

3. Price Elasticity
% change in quantity demanded
% change in price

4. If Price increase by 1 %---------- Quantity demanded decrease by:
More than 1 %
Less than 1 %
1 %
Zero 

5. By more than 1 % Elastic = % change in Qd > % Change in price
Elasticity = % change in quantity demanded
% change in price
Example = luxury Goods Qd P
200
400
100
1200

6. By less than 1 %
InElastic =% change in price > % change in quantity demanded.
Elasticity = % change in quantity demanded
% change in price
Example = Food

7. Qd P
200
400
350

8. Elasticity= % change in quantity demanded %change in price
By 1 %
Unit elastic = % change in Qd = % change in price.
Elasticity= % change in quantity demanded %change in price P Q

9. Equal Zero Perfectly inelastic= % change in QD =zero
Elasticity = % change in quantity demanded
% change in price
Example = Medecin P Q D
Elasticity = 0
Perfectly Inelastic

10. Equal  Perfectly Elastic=% in price = Zero
Elasticity = % change in quantity demanded
% Change in price
Example= substitute Goods

11. Equal  D
Elasticity =  P Q
Perfectly Elastic

12. Example
If the price of product X increased from $ 2 to $ 6 and the quantity demanded decreased from 100 kg to 50 kg Find:
1- Price Elasticity of demand.
2-Type of demand.
3 – Explain it’s meaning.

13. Elasticity E =Ed = (Qd2-Qd1) * ( p1 ) P2-P1 Qd1
2- Demand on this product is Inelastic.
3-If price increase by 1 % , the quantity demanded will decrease by 0.25 %.

14. Example 2
If a % change in quantity demanded by 30 % is associated with 60% change in price.
What is the price Elasticity of demand?

15. Answer Elasticity = % change in quantity demand % change in price60
If the price changes by 1 % , quantity demanded changes in other direction by 0.5%.

16. Example 3 If the price of good X increased from L.E 4 to
L.E 6 and the quantity demanded decrease from 100 Kg to 60 Kg Calculate the price elasticity and explain it’s meaning?

17. ANSWER E =Ed = (Qd2-Qd1) * ( p1 ) p2-p1 Qd1 1-E d = 60-100 * 4 =

18. Example 4
If 50 %decrease in price doesn’t change the quantity demanded for this good , Find the price elasticity and a 30 % decrease in quantity demanded was associated by increase in price by 20% Find the elasticity and explain it’s meaning?

19. Answer 1) E = % change in quantity demanded % change in price
E= zero / 50 = Zero
2) E = 30 /20 = Elastic
If price increase by 1 % , Quantity demanded will decrease by 1.5 %.