Elasticity of Demand – Indian Economy UPSC Notes

Elasticity of Demand – UPSC Notes Definition : Elasticity of demand measures how the quantity demanded of a good changes in response to a change in one of its determining factors, such as price, income, or the price of related goods. It is a crucial concept in economics to understand consumer behavior and market dynamics. Types of Elasticity of Demand Price Elasticity of Demand (PED): Measures the responsiveness of the quantity demanded to a change in the price of the good. Formula : P E D = %  Change in Quantity Demanded %  Change in Price PED = \frac{\%\text{ Change in Quantity Demanded}}{\%\text{ Change in Price}} Types : Perfectly Elastic Demand (PED = ∞) : Demand changes infinitely with a small price change. Perfectly Inelastic Demand (PED = 0) : Quantity demanded remains constant despite price changes. Elastic Demand (PED > 1) : A small price change leads to a larger change in demand. Inelastic Demand (PED < 1) : A price change results in a smaller change in demand. Unitary Elastic Demand (PED = 1…