Elasticity of Demand:
The law of demand is straight forward. It tells us
when the price of a good rises, its quantity demanded will fall, all other
things held constant.
We have stated demand for a product is sensitive or
responsive to price change. The variation in demand is, however, not uniform
with a change in price.
There are three methods of measuring price elasticity
of demand. (1) Total Revenue Method (2) Geometrical Method (3) Arc Method.
The quantity of a commodity demanded per unit of time
depends upon various factors such as the price of a commodity,
the money income of the prices of related goods, the tastes of
the people, etc., etc.
The price elasticity of
demand is not the same for all commodities. It may be or low depending upon
number of factor.
The concept of elasticity of demand is very useful as
it has got both theoretical and practical advantages.