Elasticity of Demand:
The law of demand elucidates that demand will change due to a change in the price of the commodity. However it does not elucidate the rate at which demand modifies to a change in price. The theory of elasticity of demand measures the rate of change in demand.
The concept of elasticity of demand was mentioned by Alfred Marshall. According to him “the elasticity (or receptiveness) of demand in a market is great or small according as the amount required increases much or little for a specified fall in price, and diminishes much or little for a specified rise in price”.
Types of Elasticity of Demand:
There are three kinds of elasticity of demand:
1. Price elasticity of demand;
2. Income elasticity of demand; and
3. Cross-elasticity of demand