Concept of Elasticity of Demand:
The concept of elasticity of demand was first introduced by the classical economists A.A Cournot and J.S. Mill. Later on, neo-classical economists Alfred Marshall developed it in a scientific way in his book Principles of Economics published in 1890.
Demand for a good is said to be “elastic” if a small change in price causes people to demand a lot more or a lot less of the good. Demand for a good is “inelastic” if a small change in prices causes people to make no change or almost no change in how much they demand of that good.
The elasticity of demand is defined as the proportionate change in quantity demanded divided by the proportionate change in its determinants.
Types of Elasticity of Demand:
1. Price Elasticity of Demand
2. Income Elasticity of Demand , and
3. Cross Elasticity of Demand
1. Price Elasticity of Demand:
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.