Meaning:

Elasticity of demand is generally defines as the responsiveness or sensitiveness of demand to a given change in the price of commodity. According to Boulding elasticity of demand measure the responsiveness of demand to change in price also it indicates the quantitative change in both prices and demand. The types of elasticity of demand are.

Types of elasticity of demand:

1. Price Elasticity of Demand:

Price elasticity of demand is one of the important concepts of elasticity which is used to describe the effect of change and price on quantity demanded. In the words of professor Hague price elasticity of demand is a technical term used by economist to describe the degree of responsiveness of the demand for good change in its price. PED is a ratio of two pure numbers the numerator is the percentage change in the quantity demanded and the denominator is the percentage change in the price of a commodity it is measured by using the following formula.

PED= percentage change in quantity demanded/percentage change in price

2. Income Elasticity of Demand:

Income elasticity of demand may be defined as the ratio of proportional change in the quantity demanded of a commodity to a given proportional change in the income. In short it indicates the extent to which demand changes with a variation in consumers income the following formula helps to measure income elasticity of demand.

YED= percentage change in demand/ percentage change in income

Generally speaking, YED is positive this is because the reason direct relationship between income and demand that is higher the income higher would be the demand and vice versa. on the basis of the numerical value of the coefficient why it is classified as greater than 1, less than 1, equal to 1, equal to zero and negative. The concept of YED helps us in classifying commodities into different categories.

3. Cross Elasticity of Demand:

It may be defined as the ratio change in the quantity demanded of a particular commodity in response to a change in the price of another related commodity. In the words of professor Watson, cross elasticity of demand is there at a of change in quantity associated with a change in the price of related goods. Generally it arises in case of substitutes and compliments. The formula for calculating cross elasticity of demand is as follows.

CED= percentage change in quantity demanded of commodity A/percentage change in the price commodity B

4. Advertising or Promotional Elasticity of Demand:

• Advertising for promotional elasticity of demand: most of the firms in the present marketing conditions spend considerable amount of money on advertisement and other such sales promotional activities with the object of the promoting its sales, thus AED refers to proportional change in demand or sales to a given change in advertising outlay the formula to calculate the advertising elasticity as follows.

AED=percentage change in demand or sale/percentage change in advertisement expenditure

The study of advertising elasticity of demand is a paramount important to a firm. Recent year because of fierce competition it is visually determining the optimum level of sales in the market. The volume advertisement expenditure also throws light on the sales proportional strategies adopted by firm to push of its total sales in the market thus it helps a firm to stimulate its total sales in the market.

5. Substitution Elasticity of Demand:

It measures the effect of the substitute of one commodity for another it may be defined as the proportional change in ratio of two substitute goods X and Y. the proportionate change in the price ratio the following formula is used to measure substitution elasticity of demand.

SED=percentage change in demand ratio of the two goods X and Y/percentage change in the price ratio of two goods X and Y.

also read: explain the changes in demand.