Elasticity Of Demand

What is Elasticity of Demand?

The demand for a commodity moves in the contrary direction of its cost. But the influence of the cost change is always not constant. Sometimes, the demand for a commodity changes substantially even for small cost price changes. On the other hand, there are some commodities for which the demand is not impacted much by cost changes. Demands for some commodities are receptive to cost price changes while demands for others are not so receptive to cost changes. Price elasticity of demand is a quantity of the receptiveness of the demand for a commodity to changes in its cost. Price elasticity of demand for a commodity is defined as the percentage of change in demand for the commodity divided by the percentage change in its cost. Price Elasticity of demand for a good is derived as :

Elasticity of Demand = percentage change in demand for the good divided by percentage change in demand for the good

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