Compact Glossary of Elasticities of Demand

PRICE ELASTICITIES A relationship is described as Perfectly elastic or infinitely elastic     When the elasticity value is Infinity Which means that The smallest possible increase (decrease) in price causes an infinitely large decrease (increase) in the quantity demanded. Elastic Less than infinity but greater than 1 The percentage decrease (increase) in the quantity […]

The main determinants of income elasticity of demand

1 Nature of the need the good covers: It is seen that the percentage of income spent on food declines as the level of income increases. This is known Engel’s law. It is noticed that for a normal good, increase in income, other things remaining the same, is associated with increase in the quantity of […]

Elasticity of Demand

  By now we have already come to know from the law of demand that, when the price of a good increase, the quantity demanded falls, other things remaining the same. But, this information is not of much practical use since we know only the direction of change in the demand for a given change […]