Agenda

• Definition
• Inelastic Demand
• Elastic Demand

Elasticity of Demand**:**

      Elasticity of demand measures the percentage change in the quantity demanded of a good or service in response to a percentage change in its price.

Types of Elasticity of Demand**:**

1. Inelastic Demand:

• Inelastic demand means that a change in price has little effect on the quantity demanded.
• In inelastic demand, Ed < 1 (ΔP > ΔQ).
• Choices are limited and few substitutes are available or because the product or service is considered a necessity.
• Graph of inelastic demand is steep.

2. Elastic Demand:

• Elastic demand means that a small change in price leads to a large change in quantity demanded.
• In elastic demand, Ed > 1 (ΔP < ΔQ).
• Choices are many and many substitues are available.
• It includes luxury items.