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The Concept of Elasticity

This document defines and discusses different types of elasticity, including price elasticity, income elasticity, and cross elasticity of demand. It provides examples of elastic agricultural products like rice and wheat. Price elasticity of demand describes how responsive consumers are to price changes, and can be elastic, inelastic, or unit-elastic. Income elasticity and cross elasticity also measure the responsiveness of demand to other factors like income and price of related goods. Determining elasticities helps sellers make pricing decisions.

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198 views3 pages

The Concept of Elasticity

This document defines and discusses different types of elasticity, including price elasticity, income elasticity, and cross elasticity of demand. It provides examples of elastic agricultural products like rice and wheat. Price elasticity of demand describes how responsive consumers are to price changes, and can be elastic, inelastic, or unit-elastic. Income elasticity and cross elasticity also measure the responsiveness of demand to other factors like income and price of related goods. Determining elasticities helps sellers make pricing decisions.

Uploaded by

Asaduzzaman rabby
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

The Concept of Elasticity

 Sellers are manually expected to hope for more demand for their products
 Higher revenues
 The buyer, ever anxious in getting the best value for his money
 The same predicament as the seller

What is elasticity?

 Changes in price may or may not affect the demand or supply of any good or service.
 A definition of elasticity is provided as follows:
 It is the measure of the sensitivity or responsiveness of quantity demanded or quantity
supplied to changes in prices.
 The definition indicates the elasticity concerns both supply and demand.

Elastic Agricultural Products


 Rice
 Wheat
 Onion
 Potato
 Zinger
 jute
Elastic and inelastic Demand
 Price elasticity of demand shows how responsive consumers are to price changes
 Elastic demand means % change in quantity demanded is more then %change in price
 inelastic demand means % change in quantity demanded is less then %change in price
 unit-elastic demand means % change in quantity demand equals %change in price
Elastic curve
Elasticity of Demand

Demand elasticity indicates the extent to which changes in price or other factors cause changes
in the quantity demanded

Demand elasticity may be classified as follows:

1. Price elasticity of demand


2. Income elasticity of demand
3. Cross elasticity of demand

Price elasticity of Demand

Price elasticity is used to determine the responsiveness of demand to changes in the price of
commodity. It may be classified with the use of formula below

Implications of price Elasticity of demand

Determining demand elasticity serves a ceresin purpose. When elasticity is known. The seller in
making decisions about price” If the price elasticity or demand is greater than one, the price
should be lowered; the price should be increased.”

Income elasticity of Demand


The demand for a product or service is affected not only by its price but also by other factors like
consumer income. The effect of consumer income on demand, the elasticity concept may be
used.

EY=Percentage change in quantity demanded


Percentage change in income

= QD2-QD1 / QD1
Y2-Y1 / Y1
Where Ey = income elasticity of demand
Y2= the new income
Y1 = the original income

Where elasticity is greater than 1, demand is said to be income elastic; when less than 1, it is
income inelastic; and when equal to 1, it is unitary elastic.

Cross elasticity of Demand


The demand for a certain good may be affected also by a change in the price of another good,
The responsiveness of the quality demanded of a particular good to changes in the price of
another good is referred to as cross elasticity of demand, the percentage change in the price of
the second good. Representation of this relationship is as follows:
Where:
Ec =cross elasticity of demand
QA2 = new demand for product A
QA1 = Original demand for product A
PB2 =new price of product B
PB1 =original price of product B

Conclusion
In view of fact that agriculture is backbone of our national economy, top-priority should be given
for the development of our agriculture. All time any government of Bangladesh has undertaken
various programmers for the improvement of agriculture. Bangladesh Agriculture in

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