Elasticity of Demand & Supply Exam-Oriented Notes for Class 11 Economics
Introduction
Elasticity helps us understand how sensitive consumers and producers are to changes in price, income, and related goods. It shows how strongly quantity demanded or supplied reacts when any of these factors change. This is important for businesses while fixing prices and for the government while making policies.
PART 1: ELASTICITY OF DEMAND
Meaning
Elasticity of demand refers to the degree of responsiveness of quantity demanded when price, income, or prices of related goods change.
Types of Elasticity of Demand
a) Price Elasticity of Demand (PED)
The most important type. It measures how quantity demanded changes when the price changes.
Types:
• Perfectly Elastic (∞) – slightest price rise → demand becomes zero
• Highly Elastic (>1) – quantity changes more than price
• Unitary Elastic (=1) – equal change
• Inelastic (<1) – quantity changes less
• Perfectly Inelastic (0) – no change in demand (e.g., insulin)
b) Income Elasticity of Demand
Shows how demand changes with a change in income.
• Positive for normal goods
• Negative for inferior goods
• Zero for necessities
c) Cross Elasticity of Demand
Measures how demand for one good responds when the price of another good changes.
• Positive for substitutes (tea–coffee)
• Negative for complements (car–petrol)
Factors Affecting Elasticity of Demand
- Nature of the commodity
- Availability of substitutes
- Habits of consumers
- Share of income spent
- Time period available for adjustment
PART 2: ELASTICITY OF SUPPLY
Meaning
Elasticity of supply shows how much quantity supplied changes when the price of the product changes.
Types of Elasticity of Supply
• Perfectly Elastic (∞) – unlimited supply at the same price
• Highly Elastic (>1) – producers can increase supply easily
• Unitary Elastic (=1)
• Inelastic (<1) – difficult to expand supply
• Perfectly Inelastic (0) – fixed supply (example: land)
Factors Affecting Elasticity of Supply
• Time period (long run is more elastic)
• Availability of raw materials
• Production capacity
• Storage facilities
• Level of technology
Exam Tips
- Always write meaning + formula + types
- Add one example for each type
- Diagrams are optional but help score more
- Keep answers in point form in exams
