Elasticity of Demand
Elasticity of Demand The term elasticity shows the reaction of one variable with respect to a change in other variables on which it is dependent. In economics, the term elasticity refers to a ratio of the relative changes in two quantities. It measures the responsiveness of one variable to the changes in another variable. The elasticity of demand measures the sensitiveness of a change in quantity demanded of a commodity due to a given change in its price. According to Mrs. Joan Robinson, "The elasticity of demand, at any price or at any output, is the proportional change of amount purchased in response to a small change in price divided by the proportional change of price." According to Marshall, "The elasticity of demand in a market is great or small according to as the amount demanded increases much or little for a given fallen price, and diminishes much or little for a given rise in price." Thus it is clear that elasticity depends primarily on proportional or pe...