12 Economics -- Basic Concept of Economics and Allocation of Resources

The proportionate change in quantity demanded for a goods due to the proportionate change inconsumer's income is called income elasticity of demand.It is usually written as:

There are three types of income elasticity:
1. Positive Income Elasticity :
If increase in income leads to increase in demand of a commodity and decrease in income leads to decrease in demand of a commodity, it is called positive income elasticity. Positive income elasticity can be divided into the following three types:

a....

The determinants of price elasticity of demand are as follow:
1.Substitute goods:
If a good has many substitutes, a change in its price will have a major impact on its demand. Consumers will turn to the substitute goods instead of buying a good that suddenly has become more expensive. A good that has many substitutes thus also has a high price elasticity of demand.

2. Proportion of income:
The largerproportion of income a good constitutes, the more responsive its consumers will be to changes in...

The percentage change in quantity demanded of a commodity due to percentage change in price of that commodity is known as price elasticity of demand.

There are 5 types of price elasticity of demand.

1.Perfectly Elastic Demand:
When negligible change in price leads to infinite change in quantity demanded ,the demand for a commodity is said to be perfectly elastic demand.

In the given figure, the price is measured in OY-axis and quantity demanded is measured along the OX-axis. PD is...