 So, we will try to now, if you look at, we discuss about price elasticity of demand, which talks about the relationship between the quantity demanded and price. What happens to change in the quantity demanded when there is a change in the price? Then we discuss about the income elasticity demand, which talks about the change in the quantity demanded due to change in the income. Then we discuss the cross price elasticity of demand, which reflects the change in the quantity demanded due to change in the price of the related goods. And finally, we discuss the advertisement and price promotion elasticity of demand, which talks about the change in the quantity demanded when due to the change in the promotional activity and the advertisement expenditure. Now, what we will do? We will solve some numerical staking each kind of the elasticity of demand. So, if you remember in case of price elasticity of demand, we discussed two types of price elasticity of demand. One is point elasticity and second one is the arc elasticity. So, in the first case, we will see how we will calculate the point elasticity of demand. So, the demand schedule is given here, when price is 3, quantity demanded is 20, when price is 4, quantity demanded is 15, when price is 6, quantity demanded is 9, when price is 7, quantity demanded is 7. We need to compute the point price elasticity of demand for decrease in price from 6 to 5 and we have to compute the point price elasticity of demand for increase in price from 5 to 6. So, we will see how we can do the point elasticity in both the cases. So, in the first case, when the movement is from 5 to 6, the original price is 5, the original quantity demanded is 11. The movement is from price 5 to 6 and the quantity demanded 11 to 9. Now, what is the change in the queue, when the price moves from 6 to 5, what is the change in the quantity demanded? Quantity demanded is from 9 to 11. So, quantity demanded is 2. What is the change in the price? The change in the price that is decreased from 6 rupees to 5 rupees. So, this is minus 1. So, and what is our original price? Our original price is 6, original quantity demanded is 9. Now, how we will find out the price elasticity of demand? Price elasticity of demand, if you remember the formula, this is del Q by del P multiplied by P by Q. So, in this case, what is del Q? del Q is 2, what is del P? del P is minus 1, P is 6 and Q is 9. So, if you solve for this, you get a value which is 1.33. So, the price elasticity of demand is minus 1.33, if there is a decrease in the price from rupees 6 to 5. Now, let us see the other one like where there is a increase in the price from rupees 5 to 6, whether it is the same elasticity of demand or the different elasticity of demand. So, in this case price is 5, quantity demanded is, price is 5, quantity demanded is 11, price is 6, quantity demanded is 9. Increase in the price from 5 to 6, quantity demanded decreases from 11 to 9. What is the change in the Q? Change in the Q is minus 2, change in the P is 1, P is equal to 5 and Q is equal to 11. If you find the price elasticity of demand now, it comes to del Q by del P multiplied by P by Q. So, in this case, del Q is minus 2, del P is 1, P is 5, Q is 11. So, the final value comes as 0.9. So, if you look at, even if in the same demand schedule, when we move from one point to another point, whether price 6 to price 5 or price 5 to price 6, the elasticity of demand is not same, because it is from the different direction if it is increasing or if it is decreasing. It means, if the case of increase or in case of decrease, the demand may be different, sometimes the demand may be inelastic and sometimes the demand may be elastic. Now, we will take the case with respect to the arc elasticity of demand. So, if you remember arc elasticity of demand, where you measure the elasticity of demand in a segment. So, if you consider here the different point of price and quantity combination. So, price is, suppose price is 10, quantity demanded is 30, price is 11, quantity demanded is 25, price is 12, quantity demanded is 21, price is 13, quantity demanded is 12, quantity demanded is 18, suppose point A, point B, point C and point D. The current price is rupees 12. Now, if there is a increase in the price by 1 rupees, suppose from price increases from 12 to 13, we will calculate how much is the change in the quantity demanded. So, now, we have to calculate the price elasticity in the segment or in the arc. Now, how we are going to do this? So, when price is 12, quantity demanded is 21, price increases from 12 to 13, quantity demanded will decrease from 21 to 18. Now, in case of arc elasticity of demand, what is the formula? Del Q by del P multiplied by P 1 plus P 2 on Q 1 plus Q 2. Since, we are calculating this in a segment, we always take the average price for find out what is the original price and what is the original quantity. So, if elasticity of demand is del Q by del P multiplied by P 1 plus P 2 and Q 1 plus Q 2, let us find out what is del Q. So, del Q is minus 3, because if you remember the quantity demanded decreases from 21 to 18. What is del P? Del P is equal to 1, because the price increases from 12 to 13. What is P 1? P 1 is 12, P 2 is 13, Q 1 is 21, Q 2 is 18. So, if you put all the value now, then del Q is minus 3, del P is 1 multiplied by 12 plus 13 upon 21 plus 18, which leads to minus 3 multiplied by 25 by 39 leads to 1.92. So, elasticity of demand is equal to 1.9, which is greater than 1. It means the percentage change in the quantity demanded is greater than percentage change in the price and this generally happens in case of the, in case of, if you remember in case of which type of goods the price, this quantity demanded is more than change in the price, in case of the elastic good, any small change in the price leads to greater change in the quantity demanded. Now, we will take the case of a numerical in case of a income elasticity of demand. So, if you look at the government announces 10 percent dearness allows to each of its employee. So, in this case, if there is a increase in the DA that leads to increase in the income. Now we need to see what is the corresponding change in the quantity demanded or by which magnitude the quantity demanded is changing when there is a change in the income of the consumer. So, 10 percent increase in the dearness allowances is announced by the government. As a result, the, as a result the monthly consumption of the petrol that leads to increase in the salary. So, 10 percent increase in the DA leads to increase of salary of the, increase of salary of the employee. That leads to the fact that the consumption of fuel has increased because there is a increase in the income. Now what is the increase? Increase earlier they used to consume 150 liter of fuel. Now they are consuming 160 liters of fuel per month. In this case what we will do? We will find out what is the income elasticity of demand. For this what we require? We require the change in the quantity, we require the change in the income, we require the original income, we requires the original quantity. So, what is the increase in the salary when there is a increase in the 10 percent DA? Earlier they were getting rupees 22,000 and earlier they were getting rupees 20,000. Now they are getting rupees 22,000. So, what is the change in the income? The change in the income is 2000. The change in the quantity demanded is, what is the quantity demanded change? That is 15 and what is the change in the, what is the original income? Original income is 20,000. What is the original quantity? Original quantity is 150. If you simplify this you get a value which is equal to 1 and that leads to the fact that increase in the income is just equal to the increase in the quantity demanded. Now, we will take a numerical with respect to the cross price elasticity of demand or may be first with the advertising elasticity of demand. So, the company increases the advertising expenditure from rupees 10 million to 20 million and as a result the sales decreases from, sales increases from 50,000 unit to 60,000 unit. We need to find out what is the advertising elasticity of demand. So, advertisement expenditure is increasing that is rupees 10 million to 20 million. This leads to increase in sale from 50,000 units to 60,000 units. Now, we will find out the advertising elasticity of demand. So, advertising elasticity of demand generally captures the relationship between the change in the advertisement expenditure and change in the quantity demanded of the sales. So, what is the formula for this? Change in the queue with respect to change in the advertisement expenditure, the original advertisement expenditure and the original quantity demanded. Now, what is the change in the advertisement expenditure? That is 20 million to 10 million, right 10 million to 10 million increases. So, what is the change? The change is 10 million. What is the change in the quantity demanded? The change in the quantity demanded is 60,000 to 50,000. So, the change is 10,000. The difference between the 60,000 and the 50,000. So, we know the change in the advertisement expenditure, we know the change in the quantity demanded. We know what is the original advertisement expenditure, we know what is the original sales. Now, we will find out what is the advertising elasticity of demand. So, del Q by del A. So, del Q is 10,000. This is 10 million, multiplied by 10, this is 50,000. So, 10,000 is the change in the quantity demanded because there is an increase in the sales from 50,000 unit to 60,000 unit. So, 10,000 is the increase in the quantity demanded, change in the quantity demanded. Earlier 10 million was the advertisement expenditure, now 20 million is the advertisement expenditure. So, 10 is the change in the advertisement expenditure, 10 is the original advertisement expenditure, 50,000 is the original sales. So, if you do this, then we will get to 0.2 as the advertisement expenditure, advertising elasticity of demand. It means 1 percent increase in the advertisement expenditure leads to 0.2 percent increase in the sales and if you look at this is the case of a relative inelastic because the change in the quantity demanded is less than the change in the advertisement expenditure. So, if you summarize whatever we have discussed in today's class and also what we discussed previously on the price elasticity of demand, the price elasticity of demand is generally defined as the degree of responsiveness of the demand for a commodity to change on its own price. It is the percentage change in the quantity demanded as a result of 1 percent change in the price of the commodity. So, if there is a 1 percent change in the price, what is the corresponding percentage change in the quantity demanded. So, through price elasticity of demand we generally measure the sensitiveness of the bias due to change in the price change in the price if there is increase or there is a decrease. So, the price elasticity of demand measure in two points, one is on point another is in the arc elasticity of demand. So, if it is in a segment generally this is known as the arc elasticity of demand, if it is measure in a point this is generally known as the point elasticity of demand. Now, what are the determinants that influence the price elasticity of demand? The first one is the nature of the commodity, the second one is the availability of the substitute, more substitute in the market more is the price elasticity of demand. The nature of the commodity whether it is luxury, whether it is necessity, whether it is a semi-luxury, and what is the proportion of income spent on the commodity. If it is more generally it is more elastic because when the consumer is spending sufficient amount of money on a commodity when the price changes they always look for the alternate. What is the time of time for adjustment available to the consumer? The longer is the time more elastic is the demand shorter is the time less elastic is the demand. What is the durability of the commodity? If it is more durable it is more elastic, but it is less durable it is less elastic. Item of addiction generally this is not considered as the normal consumption because people they are addicted to more and in this case the demand is inelastic. Then we discuss about the cross price elasticity of demand. So, cross price elasticity of demand is the degree of responsiveness of demand for a commodity to change in the price of its substitute and complementary goods. And if the cross price elasticity of demand between two goods is positive then two goods may be considered as the substitute goods and if it is negative two goods may be considered as complement. The greater is the cross price elasticity of coefficient the closer is the substitute and the higher is the negative cross elasticity coefficient the higher is the degree of the complementarity. Then we discuss about the income elasticity of demand it can be defined as the degree of responsiveness of the demand to change in the consumer income. The income elasticity of demand is always positive specifically in the case of the normal goods, but in case of inferior good the income elasticity of demand is always negative because the demand for inferior good decreases with the increase in the consumers income and vice versa. Then we discuss the advertisement elasticity of demand and found useful in the determination of the optimum level of advertisement expenditure and it helps the producer to decide that what is the right kind of production they have to do it in the future. So, that diverge the over production and under production. And for this typical topic this elasticity of demand these are the reference what has been followed for preparing this specific session.