Economics Presentation

By
Sanjana (19MBA1049)
Harshit(19MBA1003)
Mirunalini(19MBA1022)
Nisha(19MBA1005)
Saravanan(19MBA1043)
 Elasticity of Demand
Elasticity is a measure of responsiveness of one
variable to another
 Price elasticity of demand
• Price elasticity of demand (PED or Ed) is a
measure used in economics to show the
responsiveness, or elasticity, of the quantity
demanded of a good or service to a change in
its price when nothing but the price changes.
More precisely, it gives the percentage change
in quantity demanded in response to a one
percent change in price.
Graph:
 Giffen goods
• In economics and consumer theory, a Giffen
good is a product that people consume more of
as the price rises and vice versa—violating the
basic law of demand in microeconomics.But a
Giffen good are inferior good in the minds of
consumers (being more in demand at lower
incomes) that this contrary income effect more
than offsets the substitution effect, and the net
effect of the good's price rise is to increase
demand for it. A Giffen good is considered to be
the opposite of an ordinary good.
Graph of demand curve of giffen goods:
 Cross Elasticity of Demand
It is the proportional(percentage) change in the
demand for good X divided by the proportional
(percentage) change in the price of good Y
 Formula for calculating
Cross Elasticity of Demand
Cross Elasticity of Demand
=Percentage change in demand of X
Percentage change in price of Y

EXY= X *Py
Py X

X = Demand for good X

PY = price of good Y
X = change in demand of good X
PY =change in price of good Y
Demand curve of cross elastic goods
Substitue goods VS complementary goods
• Substitues in consumption are goods that can be
used in place of each other.Ex:you can substitue
coke with pepsi
• Complements are the goods that are consumed
together.Ex:car and fuel
• The cross price elasticity for substitues in
consumption is positive.This is because a rise in the
price of good Y will cause people to substitues the
cheaper good X for Y
Elasticity of Complementary Goods
Calculation of Cross Elasticity of demand for
subsitues

Price of pepsi # of pepsi cans sold Price of coke

25 10 20

25 20 30

Exy= (10-20)\15 = -10\15 = 5 = 1.67=1.67>0

(20-30)\25 -10\25 3
 Demand curve of substitues
Y

25 D1 D2

X
20 30
Price of coke
 What is the Income Elasticity of Demand?

Income elasticity of demand refers to the

sensitivity of the quantity demanded for a certain
good to a change in real income of consumers
who buy this good, keeping all other things
constant. The formula for calculating
income elasticity of demand is the percent
change in quantity demanded divided by the
percent change in income. With income elasticity
of demand, you can tell if a particular good
represents a necessity or a luxury.
Formula:
Graph: