Elasticity Of Demand

Elasticity of demand explains the relationship between a change in price and the consequent change in the amount demanded. Marshall introduced the concept of elasticity of demand. Elasticity of demand shows the extent of change in quantity demanded in response to a change in price.

Definition Of Elasticity Of Demand:
In the words of Marshall, “The elasticity of demand in a market is great or small according as the amount demanded increases much or little for a given fall in the price and diminishes much or little for a given rise in price.”

Elastic demand: A small change in price may lead to a great change in quantity demanded. In this case, demand is elastic.

Inelastic demand: If a big change in price is followed by a small change in quantity demanded, then the demand is inelastic.