Page 135 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
Elasticity at a Glance

Kinds Numerical Measure Description

(A) Price Elasticity of Demand

(1) Total Inelasticity Zero (E = 0) There is no change in Quantity of Demand
d
after change in price
(2) Inelasticity or less More than Zero but Less Proportional change in Quantity of
than one than Unit Demand less proportional change in price
(0 < E < 1)
d
(3) Unit Elasticity One E = 1 Proportional change in Quantity equal to
d
proportional change

(4) Elasticity or more More than One but less than Proportional change in Quantity of
than Unit Demand is more in proportional change
Infinity (1 < E < ∞)
d
(5) Total Elasticity Infinity (E = ∞) Buy any Quantity on a constant price but
d
nothing on high price
(B) Income Elasticity of Demand

(1) Normal Goods Positive Quantity of Demand increases after
increase in income

(a) Unit One (E = 1) Equal to change in percentage income
y
percentage change in Quantity of Demand
(b) Less than Unit or Less than one (E < 1) Low change in percentage in quantity of
y
Inelasticity demand in respect of change in percentage
income

(c) More than one More than one (E > 1) More percentage change in demand
y
Elasticity quantities in respect of income of
perentage change

(2) Inferior goods Negative Demand Quantity is less after increase in
income

(C) Cross Elasticity of Demand

(1) Substitutes Positive After increase in price of Substitutes
increases Quantity of Demand in related
object

(2) Complementary Negative Increase in price of complementary
decreases quantity of related objects

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