Principles of Economics (1) I.

Com Part I

CHAPTER # 3
Demand
Meaning of Demand:
Demand is the quantity of anything which will be purchased from the market at a specific price.
But two conditions are necessary for creating demand.
i. Willingness to purchase
ii. Purchasing power
Demand = Willingness + Purchasing Power
Individual Demand:
The quantity of a commodity which a consumer is ready to purchase at different prices is called
individual demand.

Market Demand:
The total quantity of a commodity which is purchased by all the consumers in the market at
different prices is called market demand. Market demand is obtained by addition of individual
demand.

Joint Demand:
When two or more commodities are used to satisfy a single want then demand for all
commodities is called joint demand i.e. bike and petrol, ink and pen etc.

Composite Demand:
Some commodities are used for different purposes. Demand for such commodities for all their
purposes is called composite demand i.e. electricity, wood etc.

Q. No.1
Define and explain Law of Demand with the help of schedule and
diagram. Also describe its assumptions and limitations.
Ans:
Introduction:
Demand is the quantity of anything which will be purchased from the market at a specific price.
Law of demand shows the negative relationship between quantity demanded of a commodity
and its price i.e. P↓ Qd ↑ and P↑ Qd ↓. Thus demand is the function of price i.e. Q d = f (P). The
standard form of law of demand is Qd = a – bP.
Law of Demand:
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Principles of Economics (2) I.Com Part I

According to Marshall:
“Other things being equal, the amount demanded increases with fall in price and diminishes
with rise in price”.
According to Baxter:
“The lower is the price, the greater is the quantity of the product demanded and vice versa”.
In simple words:
“Other things remaining the same, a rise in the price of a commodity is followed by a
contraction in demand and fall in price is followed by an extension in demand”.

Schedule: Quantity
Price
Demand
It is clear from the schedule that as the price of the commodity falls,
4 200
demand is extending. Price has fallen from Rs.4 to Rs.2 per kg and
3 300
demand has extended from 200 to 400.
2 400
Diagram:
Diagram shows that when price of a commodity is Rs.4 per kg,
the demand is 200kg as shown by the point A and when price
of the commodity falls to Rs.2 per kg, the demand is 400kg as
shown by point C. Demand curve is drawn by joining the
points A, B, C. Diagram shows that demand curve is negative
sloped which means increase in price results decrease in
demand.

Assumptions:
Law of demand holds under following assumption.
1. Homogeneous Units:
It is assumed that units of a commodity are homogeneous because if the quality of the lateral
units purchased is superior then with an increase in price, demand may not contract.
2. No Change in Income:
Income of the people should not be changed. In case of increase in income demand will also
increase. It violates the law of demand. We should keep in mind that law of demand express a
negative relationship between price and demand.
3. No Change in Taste and Fashion:
If the commodity is used as a fashion or the taste of the consumer changes, the law does not
hold good because if we like a particular commodity or its use is a fashion then instead of
increase in price, the demand will expand.

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Principles of Economics (3) I.Com Part I

4. No change in Price of Substitute:

It is assumed that price of the substitutes do not change. If the prices of the substitutes
decrease, the demand for original commodity will decrease and vice versa.
5. Climate and Weather Condition:
The law does not hold well when weather changes. In summer season demand for ice increase
at same price and in winter season even a lower price does not extend the demand.
6. No Change in Population:
It is assumed that the population does not increase because with an increase in population
demand will increase at constant prices.

Exceptions or Limitations:
Following are the limitations of the law of demand.
1. Inferior and Superior Goods:
The law of demand does not apply in case of inferior and superior goods. Fall in price of an
inferior good will bring further fall in demand and rise in price of a superior good will bring
further rise in demand.
2. Danger of being Scarce:
If there is danger that a commodity will become scarce or it will not be available in future, then
instead of increase in price, demand will increase.
3. Use Confers Distinction:
If the use of a commodity is distinctive, then the people will increase its purchase instead of
increase in price.
4. Necessities of Life:
If the price of one of the necessity of life rises, the expenditures on other goods decrease
without increase in their prices.
5. Giffen Goods:
The law of demand does not come true in case of Giffen goods. People do not buy these goods
even at low prices.
6. Ignorance of Consumer:
The consumers usually judge the quality of a commodity form its price. A low price commodity
is considered as inferior and less quantity is purchased. A high priced commodity is treated as
superior good and more quantity is purchased. The law of demand does not apply in this case.

Why Demand Curve is Negative Sloped?

There are three reasons of negative sloped of demand curve.
1. Price Effect
2. Income Effect
3. Substitution Effect

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Principles of Economics (4) I.Com Part I

Q. No.2 #
Explain the following Concepts with schedule and diagrams.
1. Movement along the Demand Curve or Extension and Contraction in Demand.
2. Shift in Demand Curve or Rise and Fall in Demand.
Ans:
Introduction:
The demand for a commodity may change due to many factors. For example
 Change in Price of the commodity  Change in Fashion
 Change in Income of the Consumer  Change in Weather
 Change in Price of Substitute  Change in Population
A change in any factor can change the demand for commodity. This change in demand can be
classified as:

1. Movement along the Demand Curve or Extension and Contraction in Demand

If the change in demand is due to change in the price of that commodity, it is called extension or
contraction in demand.
When the price of a commodity decreases, its quantity demanded increase; it is called extension
in demand.
When the price of a commodity increases, its quantity demanded decreases; it is called
contraction in demand.

The movement of the demand is Quantity

Price
explained with the help of Demand
schedule and diagram. 1 10
Schedule and diagram show that 2 8
with the increase in price, 3 6
quantity demanded contracts and 4 4
with the decrease in price, 5 2
quantity demanded extends.

2. Shift in Demand Curve or Rise and Fall in Demand:

If the change in demand is not due to change in price, but due to change in some other factors
(like income, price of substitute and complementary goods, taste, fashion, habits, population
etc), it is called shift in demand or rise and fall in demand.
When quantity demanded of a commodity decreases due to some other factors instead of price;
it is called Fall in demand.

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Principles of Economics (5) I.Com Part I

When quantity demanded of a commodity increases due to some other factors instead of price;
it is called Rise in demand.
Fall in Demand:
There are two types of fall in demand.

First Type:
Price Demand
When the price remains constant and
3 8
quantity demanded decreases due to
3 6
other factors, it is called fall in
3 4
demand. As shown by schedule and
diagram.

Second Type:
When the price of the Commodity Price Demand
decreases but quantity demanded 4 6
remains constant, it is also called fall 3 6
in demand. As shown by schedule and 2 6
diagram.

Rise in Demand:
There are also two types of rise in demand.

First Type:
When the price remains constant and Price Demand
quantity demanded increases due to 3 4
other factors, it is called rise in 3 6
demand. As shown in by schedule and 3 8
diagram.

Second Type:
When the price of the commodity Price Demand
increase but quantity demanded 2 6
remains constant, it is called rise in 3 6
demand. As shown by schedule and 4 6
diagram.

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Principles of Economics (6) I.Com Part I

Q. No.3
Define Elasticity of Demand. Also explain different methods to
measure it.
Ans:
Introduction:
There are many factors including price that disturb the demand. These factors change the
demand for anything. But we do not know that how much changes take place in quantity
demanded when price changes. For the sake of this purpose, we apply the concept of elasticity
of demand.

Elasticity of Demand:
According to Marshall:
“Degree of responsiveness of quantity demanded to change in price is known as elasticity of
demand”.
According to Lipsey:
“Elasticity of demand is the rate of the percentage change in demand due to percentage change
in price”.
In simple words:
Elasticity of demand is a relationship between the proportionate change in quantity demand
and proportionate change in price of a commodity.

Symbolically it is written as:

Proportionate Change in Quantity Demand

Ed = Proportionate Change in Price

∆Q/Q ∆Q P
Ed = = ×
∆P/P ∆P Q

Where ∆Q = Change in Quantity Demand & ∆P = Change in Price

Measurement of Elasticity of Demand:

Economists have given following four methods for measuring elasticity of demand.
1. Proportionate or Percentage Method
2. Total Expenditure or Outlay Method
3. Mathematical Formulas Method

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Principles of Economics (7) I.Com Part I

1. Total Expenditure or Outlay Method:

In this method, we compare the changes in total expenditure before and after the change in
price.
1. Elasticity equal to unity (E = 1):
If with a change in price total expenditure remains the same,
the elasticity of demand is equal to unity.
Quantity Total
Price
Demanded Expenditure
2 4 8
4 2 8

2. Elasticity greater than unity (E >1):

If with an increase in price total expenditure decreases and
with a decrease in price total expenditure increases, the
elasticity of demand is called greater than unity e.g. comforts,
durable goods, luxuries etc
Quantity Total
Price
Demanded Expenditure
2 8 16
4 2 8

3. Elasticity less than unity (E <1):

If with an increase in price total expenditure increases and
with a decrease in price total expenditure decreases, the
elasticity of demand is called less than unity e.g. necessities of
life etc
Quantity Total
Price
Demanded Expenditure
2 4 8
6 2 12

2. Proportionate or Percentage Method:

In this method, we compare proportionate or percentages changes in quantity demanded and
proportionate or percentage change in price.
Percentage Change in Quantity Demand
Ed =
Percentage Change in Price

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Principles of Economics (8) I.Com Part I

1. Elasticity equal to unity (E = 1):

If the percentage change in quantity demanded is equal to percentage change in price,
elasticity of demand is equal to unity. Such as 25%
Ed = =1
25%
2. Elasticity greater than unity (E >1):
If the percentage change in quantity demanded is greater than percentage change in price,
elasticity of demand is greater than unity. Such as 30%
Ed = >1
25%
3. Elasticity less than unity (E <1):
If the percentage change in quantity demanded is less than percentage change in price,
elasticity of demand is less than unity. Such as 20%
Ed = <1
30%
3. Mathematical Formulas Method:
Mathematically we can measure elasticity of demand with the help of the following two
methods.
1. Point Elasticity of Demand:
When there is very small change in demand due to a small change in price, it is called point
elasticity of demand. Formula of Point elasticity of demand is: ∆Q P
Ed = ×
2. Arc Elasticity of Demand: ∆P Q
When there is big change in demand due to big change in price, it is called arc elasticity of
demand. Formula of Arc elasticity of demand is: Q2 – Q1 P2 + P 1
Ed = ×
Q2 + Q1 P2 – P1

Some Types of Goods

Substitute Goods:
Goods which can be used in place of other goods are called substitute goods i.e. Pepsi & Coke,
Beef & Mutton, Wheat and Rice etc.
Complementary Goods:
When the demand for one commodity depends upon other commodity and both commodities
are used together, they are called complementary goods i.e. Pen & Ink, Car & Petrol, Mobile &
Sim Card etc.
Inferior Goods:
A good for which demand falls as consumer’s income rise is known as Inferior good.
Giffen Goods:
Some of the inferior goods having expensive substitute are called Giffen goods or those inferior
goods in which law of demand does not apply is called Giffen goods i.e. rice and broken rice. In
case of Giffen goods demand curve is positive sloped.

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Principles of Economics (9) I.Com Part I

Some More Types of Elasticity of Demand

More Elastic Demand:
When a small change in price causes a big change in demand, it is called more elastic demand.
The demand for comforts and luxury goods is more elastic.

Less Elastic Demand:

When a big change in price causes a very small change in demand, it is called less elastic
demand. The demand for necessities of life is less elastic.

Infinite or Perfectly Elastic Demand:

When there is no change in price but quantity demand increases infinitely, it is called infinite or
perfectly elastic demand. Here the demand curve is horizontal.

Zero or Perfectly Inelastic Demand:

When due to any change in price, demand remains unchanged; it is called zero or perfectly
inelastic demand. Here the demand curve is vertical.

Income Elasticity of Demand:

Change in quantity demanded of a commodity due to change in income of consumer is called
income elasticity of demand. ∆Q Y
Ey = ×
Cross Elasticity of Demand: ∆Y Q

If the change in demand is not due to change in price of that good but the change in demand is
due to change in price of inter-related goods (substitutes & complementary), it is called cross
elasticity of demand.
∆Qx Py
Ec = ×
∆Py Qx
Where ∆Qx = Change in Quantity Demand of commodity X
And ∆Py = Change in price of commodity Y
For substitute goods cross elasticity of demand is positive i.e. Pepsi & Coke
For complementary goods cross elasticity of demand is negative i.e. Pen & ink

Determinants of Elasticity of Demand:

Following are the main determinants of elasticity of demand.
Nature of the Commodity The Possibility of Substitutes
Number of Uses Durability
Price Level Income Level
Time Period Future Expectations

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Principles of Economics (10) I.Com Part I

Short Questions
Q.No.1: What is meant by Demand?
Ans: Demand is the quantity of anything which will be purchased from the market at a specific
price. But two conditions are necessary for creating demand.
i. Willingness to purchase
Demand = Willingness + Purchasing Power
ii. Purchasing power
Q.No.2: Define Individual Demand.
Ans: The quantity of a commodity which a consumer is ready to purchase at different prices is
called individual demand.
Q.No.3: Define Market Demand.
Ans: The total quantity of a commodity which is purchased by all the consumers in the market
at different prices is called market demand. Market demand is obtained by addition of
individual demand.
Q.No.4: Define Joint Demand.
Ans: When two or more commodities are used to satisfy a single want then demand for all
commodities is called joint demand i.e. bike and petrol, ink and pen etc.
Q.No.5: Define Composite Demand.
Ans: Some commodities are used for different purposes. Demand for such commodities for all
their purposes is called composite demand i.e. electricity, wood etc.
Q.No.6: Define Law of Demand.
Ans: Other things remaining the same, a rise in the price of a commodity is followed by a
contraction in demand and fall in price is followed by an extension in demand.
Q.No.7: Write four assumptions of Law of Demand.
Ans: Following are assumptions of Law of Demand.
1.
2. Homogeneous Units 4. No change in Taste and Fashion
3. No change in Income 5. No change in Population
Q.No.8: Write four limitations of Law of Demand.
Ans: Followings are the Limitations of Law of Demand.
1. Inferior and Superior goods 3. Necessities of Life
2. Danger of being Scarce 4. Giffen Goods
Q.No.9: Why demand curve is negative sloped?
Ans: There are three reasons of negative sloped of demand curve.
1. Price Effect 2. Income Effect

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Principles of Economics (11) I.Com Part I

3. Substitution Effect
Q.No.10: Write four causes of change in Demand.
Ans: Demand of a commodity may change due to following factors.
1. Change in Price of Commodity 3. Change in Price of Substitute
2. Change in Income of Consumer 4. Change in Fashion

Q.No.11: Differentiate between Contraction and Extension of Demand.

Ans: When the price of a commodity decreases, its quantity demanded increase; it is called
extension in demand. When the price of a commodity increases, its quantity demanded
decreases; it is called contraction in demand.

Q.No.12: Differentiate between Rise and Fall of Demand.

Ans: When quantity demanded of a commodity decreases due to some other factors instead of
price; it is called Fall in demand. When quantity demanded of a commodity increases due to
some other factors instead of price; it is called Rise in demand.

Q.No.13: Define Elasticity of Demand.

Ans: Degree of responsiveness of quantity demanded to change in price is known as elasticity of
demand.

Q.No.14: Write different methods to measure Elasticity of Demand.

Ans: Followings are the methods to measure Elasticity of Demand.
1. Proportionate or Percentage Method
2. Total Expenditure or Outlay Method
3. Mathematical Formulas Method

Q.No.15: Define Elasticity of Demand equal to unity.

Ans: If the percentage change in quantity demanded is equal to percentage change in price,
elasticity of demand is equal to unity.

Q.No.16: Define Elasticity of Demand less than unity.

Ans: If the percentage change in quantity demanded is less than percentage change in price,
elasticity of demand is less than unity.

Q.No.17: Define Elasticity of Demand greater than unity.

Ans: If the percentage change in quantity demanded is greater than percentage change in price,
elasticity of demand is greater than unity.

Q.No.18: Define Point Elasticity of Demand. Write its formula.

Ans: When there is very small change in demand due to a small change in price, it is called point
elasticity of demand. ∆Q P
Ed = ×
∆P Q
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Principles of Economics (12) I.Com Part I

Q.No.19: Define Arc Elasticity of Demand. Write its formula.

Ans: When there is big change in demand due to big change in price, it is called arc elasticity of
demand. Q2 – Q1 P2 + P 1
Ed = ×
Q2 + Q1 P2 – P1
Q.No.20: What do you mean by Substitute goods?
Ans: Goods which can be used in place of other goods are called substitute goods i.e. Pepsi &
Coke, Beef & Mutton, Wheat and Rice etc.

Q.No.21: What do you mean by Complementary goods?

Ans: When the demand for one commodity depends upon other commodity and both
commodities are used together, they are called complementary goods i.e. Pen & Ink, Car &
Petrol, Mobile & Sim Card etc.

Q.No.22: Define Inferior goods.

Ans: A good for which demand falls as consumer’s income rise is known as Inferior good.

Q.No.23: Define Giffen goods.

Ans: Some of the inferior goods having expensive substitute are called Giffen goods or those
inferior goods in which law of demand does not apply is called Giffen goods i.e. rice and broken
rice. In case of Giffen goods demand curve is positive sloped.

Q.No.24: What do you mean by More Elastic Demand?

Ans: When a small change in price causes a big change in demand, it is called more elastic
demand. The demand for comforts and luxury goods is more elastic.

Q.No.25: What do you mean by Less Elastic Demand?

Ans: When a big change in price causes a very small change in demand, it is called less elastic
demand. The demand for necessities of life is less elastic.

Q.No.26: What do you mean by Infinite Elastic Demand?

Ans: When there is no change in price but quantity demand increases infinitely, it is called
infinite or perfectly elastic demand. Here the demand curve is horizontal.

Q.No.27: What do you mean by Zero Elastic Demand?

Ans: When due to any change in price, demand remains unchanged; it is called zero or perfectly
inelastic demand. Here the demand curve is vertical.

Q.No.28: Define Income Elasticity of Demand. Write its formula.

Ans: Change in quantity demanded of a commodity due to change in income of consumer is
called income elasticity of demand. ∆Q Y
Ey = ×
∆Y Q

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Principles of Economics (13) I.Com Part I

Q.No.29: Define Cross Elasticity of Demand. Write its formula.

Ans: If the change in demand is not due to change in price of that good but the change in
demand is due to change in price of inter-related goods (substitutes & complementary), it is
called cross elasticity of demand. ∆Qx Py
Ec = ×
∆Py Qx
Q.No.30: Write four determinants of Elasticity of Demand.
Ans: Followings are the main determinants of Elasticity of Demand.
5. Nature of the Commodity 8. Time Period
6. Number of Uses 9. Price Level
7. Durability 10. Income Level

Multiple Choice Questions

Four possible answers are given for the following questions. Choose the correct answer.
1. Quantity of a commodity which is purchased at a particular price is called
a. Demand c. Stock
b. Supply d. None of them
2. The term “Demand” in Economics means
a. Desire c. Need
b. Purchasing Power d. Both a & b
3. Quantity of a commodity which a single consumer purchased from market at specific price
is called
a. Individual demand c. Supply
b. Market demand d. None of them
4. The total quantity of a commodity which is purchased by all the consumers in the market at
different prices is called
a. Individual demand c. Supply
b. Market demand d. None of them
5. Which combination of the following is of joint demand
a. Tea and Coffee c. Meat and Grocery
b. Petrol and Car d. Inkpot and Book
6. Price and demand has a relationship
a. Positive c. Increasing
b. Negative d. None of them
7. In functional equation of Law of Demand “Qd = a – bP”, Q & P are
a. Constants b. Parameters

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Principles of Economics (14) I.Com Part I

c. Variables d. Identities
8. In functional equation of Law of Demand “Qd = a – bP”, a & b are
a. Constants c. Variables
b. Parameters d. Identities
9. According to Law of Demand when price of a commodity increases, then demand
a. Decreases c. Contracts
b. Increases d. Extends
10. Slope of demand curve is
a. Positive c. Horizontal
b. Negative d. Vertical
11. The goods on which Law of Demand does not apply are called
a. Giffen goods c. Capital goods
b. Inferior goods d. All of above
12. Decrease in demand due to increase in price is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
13. Increase in demand due to decrease in price is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
14. When demand increase due to other factors instead of price, it is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
15. When demand decrease due to other factors instead of price, it is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
16. When price of a commodity increases but its demand remains constant, it is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
17. When price of a commodity decrease but its demand remains constant, it is called
a. Extension of demand c. Rise of demand
b. Contraction of demand d. Fall of demand
18. Movement on the same demand curve is called
a. Extension and Contraction c. Decrease in demand
b. Increase in demand d. Rise and fall in demand
19. In case of rise in demand, demand curve shifts
a. Left side c. Upward
b. Right side d. Both b & c

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20. In case of fall in demand, demand curve shifts

a. Left side c. Right side
b. Downward d. Both a & b
21. Elasticity of demand is the name of
a. Change in demand c. Change in income
b. Change in price d. Change in taste
22. The ratio of change in quantity demanded due to change in price is called
a. Law of Demand c. Income Elasticity
b. Elasticity of Demand d. Cross Elasticity
23. Unity method is also known as
a. Total Revenue c. Total Expenditure
b. Total Satisfaction d. Total Utility
24. Unity method to measure elasticity of demand was presented by
a. Adam Smith c. Robbins
b. Marshall d. Keynes
25. Flux method is also known as
a. Percentage method c. Total Expenditure method
b. Unitary method d. None of them
26. If the ratio of change in demand is equal to ratio of change in price, elasticity of demand
will be
a. Equal to unity c. Less than unity
b. More than unity d. Zero Elasticity
27. If the ratio of change in demand is greater than the ratio of change in price, elasticity of
demand will be
a. Equal to unity c. Less than unity
b. More than unity d. Zero Elasticity
28. If the ratio of change in demand is less than the ratio of change in price, elasticity of
demand will be
a. Equal to unity c. Less than unity
b. More than unity d. Zero Elasticity
29. A slight change in demand and price is called
a. Point Elasticity of Demand c. Income Elasticity of Demand
b. Arc Elasticity of Demand d. Cross Elasticity of Demand
30. A big change in demand and price is called
a. Point Elasticity of Demand c. Income Elasticity of Demand
b. Arc Elasticity of Demand d. Cross Elasticity of Demand

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Principles of Economics (17) I.Com Part I

31. Measurement of Arc elasticity of demand was presented by

a. Keynes c. Adam Smith
b. Marshall d. R.G.D Allen
32. Demand for basic necessities of life is
a. More Elastic c. Perfectly Elastic
b. Less Elastic d. Perfectly Inelastic
33. Demand for luxuries goods is
a. More Elastic c. Perfectly Elastic
b. Less Elastic d. Perfectly Inelastic
34. If demand is not influenced by the change in price, elasticity of demand will be
a. More than unity c. Zero Elasticity
b. Less than unity d. Infinite Elasticity
35. If due to very slight decrease in price, demand goes on increasing, elasticity of demand will
be
a. More than unity c. Zero Elasticity
b. Less than unity d. Infinite Elasticity
36. If demand of a commodity changes due to change in income, it is called
a. Point Elasticity of Demand c. Income Elasticity of Demand
b. Arc Elasticity of Demand d. Cross Elasticity of Demand
37. If demand of a commodity changes due to change in price of its substitute, it is called
a. Point Elasticity of Demand c. Income Elasticity of Demand
b. Arc Elasticity of Demand d. Cross Elasticity of Demand
38. If two goods are complimentary, cross elasticity of demand will be
a. Zero c. Positive
b. Infinite d. Negative
39. If two goods are substitutes cross elasticity of demand will be
a. Zero c. Positive
b. Infinite d. Negative
40. Elasticity of demand for perishable goods is
a. More elastic c. Equal to unity
b. Less elastic d. Equal to zero
41. Elasticity of demand for durable goods is
a. More elastic c. Equal to unity
b. Less elastic d. Equal to zero
42. The goods which can used in place of each other are called
a. Substitute goods c. Giffen goods
b. Complimentary goods d. Inferior goods

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Principles of Economics (18) I.Com Part I

43. The goods which are jointly demanded are called

a. Substitute goods c. Giffen goods
b. Complimentary goods d. Inferior goods
44. Some inferior goods having expensive substitutes are called
a. Substitute goods c. Giffen goods
b. Complimentary goods d. Inferior goods

Answers to Multiple Choice Questions:

1 Demand 16 Rise of demand 31 R.G.D Allen
2 Both a & b 17 Fall of demand 32 Less elastic
Extension and
3 Individual demand 18 33 More elastic
contraction
4 Market demand 19 Both b & c 34 Zero elasticity
5 Petrol and car 20 Both a & b 35 Infinite elasticity
Income elasticity of
6 Negative 21 Change in demand 36
demand
Cross elasticity of
7 Variables 22 Elasticity of demand 37
demand
8 Constants 23 Total expenditure 38 Negative
9 Contracts 24 Marshall 39 Positive
10 Negative 25 Percentage method 40 Less elastic
11 Giffen goods 26 Equal to unity 41 More elastic
12 Contraction of demand 27 Greater than unity 42 Substitute goods
13 Extension of demand 28 Less than unity 43 Complimentary goods
Point elasticity of
14 Rise of demand 29 44 Giffen goods
demand
15 Fall of demand 30 Arc elasticity of demand

Prof. Adnan Kanwal Punjab College Gujrat