Elasticity of Demand: Class 12 Microeconomics Chapter 4

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Elasticity of Demand: Class 12 Microeconomics Chapter 4

Vedantu PDF for Economics Class 12 Chapter 4 Solutions Available For Free

Economics is divided into two sections: Macroeconomics and Microeconomics. Microeconomics is the study of financial decisions made by individuals, firms, and households. Macroeconomics deals with broader aspects of decisions made by countries and governments. Sandeep Garg Class 12 Solutions Chapter 4 Elasticity of Demand, articulates how a factor changes or stretches responding to the amendment of another correlated variable. Any elastic substance like; rubber or leather band, or steel ring will stretch when an external force is applied. Likewise, Sandeep Garg Microeconomics Class 12 solutions chapter 4 elasticity of demand explains various economic elasticities.

Class 12 Chapter 4 Microeconomics Sandeep Garg Solutions - Elasticity of Demand

Chapter 4 Sandeep Garg - Elasticity of Demand

Let's Discuss the Elasticity of Demand in Sandeep Garg Microeconomics Class 12:

The elasticity of demand refers to the degree of responsiveness of quantity demand due to changes in its factors. There are 3 types of Elasticity of Demand:

Price Elasticity of Demand - The degree of responsiveness of quantity demand due to a 1% change in its price. The formula of elasticity of price (Ep) is the ratio of percentage change in quantity demand to the percentage change in price.
Income Elasticity - The degree of responsiveness of quantity demanded due to a change in the income of the consumer. The formula of elasticity of income (Ey) is the ratio of percentage change in quantity demand to that of percentage change on income.
Cross Price Elasticity - The degree of responsiveness of quantity demand (of day X goods) due to a 1% change in price (of say Y say). The formula of cross-price Elasticity is the ratio of percentage change in quantity demand to that of percentage change in price.

The Three Ways To Measure Price Elasticity:

Percentage Method - Also known as the Arithmetic Method, here there is a comparison of the percentage change in demand with the percentage change in price. This is also the formula of elasticity of demand.
Total Expenditure Method - This method was introduced by Alfred Marshall. The flexibility of this method is measured based on the costs incurred by the consumer when the price of the asset changes.
Geometric Method - This method was created by Alfred Marshall as well. The price elasticity of demand is measured by the ratio of the lower segment of the demand curve to the upper segment of the demand curve.

Importance of Sandeep Garg Microeconomics Class 12 Solutions Chapter 4:

Sandeep Garg is a reliable source of study which encourages the students to strengthen their base, and score good marks. The entire PDF is based on the latest board syllabus. A step-by-step guide and solutions to the questions is included in the PDF. Vedantu offers the students an option to download Sandeep Garg Solutions class 12 Microeconomics Chapter 4 Elasticity of Demand free of cost from the Vedantu website. It provides a clear and detailed view of every problem and the students are motivated to study hard. Written by a group of experts and teachers, these solutions are bound to prove the best for the students. It is recommended for every student to use Sandeep Garg Microeconomics Class 12 Solutions Chapter 4 - Elasticity of Demand for preparation.

FAQs on Elasticity of Demand: Class 12 Microeconomics Chapter 4

1. Define the Income demand, Cross demand and Composite demand from Chapter 4 Elasticity of Demand.

The following are the definitions of the terms as per chapter 4 of Sandeep Garg:

Income Demand - Other things remaining the same, Income Demand indicates the relationship of the consumer and the quantity.
Cross Demand - Other things remaining the same, Cross Demand indicates the demand for a commodity affected by changes in the prices of related goods. Eg - Substitute goods and complementary goods.
Composite demand - In the case of two substitute goods, an increase in the quantity demanded by one commodity will reduce the demand for the other. The demand for the substitute is known as composite demand. For Eg - An increase in demand for tea may reduce the demand for coffee.

2. Why is the Market demand curve flatter (elastic)?

The market demand curve is lower than the individual demand (inelastic). This happens because as the price changes, the equal change in market demand is more than the same change in individual demand. The market demand curve is the curve that indicates the difference between the price and the price required by all buyers in a particular market. We can say that at each price the market demand is higher than the individual demand. That is why the market demand curve is flatter than the individual demand curve.

3. What is the difference between ex-ante and export demand in chapter 4 elasticity of demand?

The main differences between ex-ante and export demand as per chapter 4 has been listed below:

Ex-ante demand refers to the number of goods that consumers want to buy during a particular period. On the other hand, export demand refers to the number of goods that the consumers purchase during a specific period.
Actual transaction does not take place in ex-ante demand. The actual transaction takes place in export demand.
Ex-ante demand has nothing to do with the price of the commodity whereas in export demand the price of the commodity is very important.
An example of ex-ante demand is Rohan's wanting to buy a car. An example of export demand is Rohan buying a car.

4. Explain the determinant of the existence of close substitutes of the commodity in Chapter 4 elasticity of demand.

Existence of Close Substitutes: The elasticity of demand for a commodity depends on the existence of substitute commodities. If substitutes exist, these will be used in place of the commodity (in question) when its price increases. The demand for this commodity will, therefore, fall sharply. In other words, demand will be elastic. This is how the existence of tea makes the demand for coffee elastic. Similarly, the demand for bus transport is elastic because of the existence of the other modes of transport (for instance tramways). You can check all of these answers and more available in the study material available for free on Vedantu.

5. Explain the concept of how period affects the elasticity of demand for a commodity.

The elasticity of demand depends on the period - Short period and Long period. Price elasticity is generally low for the short period as compared to the long period. This is for two reasons; firstly, it takes time for consumers to adjust their tastes and preferences, and habits. In the long run, consumers may adjust their preferences and consumption patterns. Secondly, new substitutes may be available in the long run, therefore, if the price of a commodity rises, the demand for it will be inelastic in the short run as the substitutes may not be available but in the long run demand will be elastic as substitutes are available. Short-run – Inelastic demand as taste and preferences and close substitutes are not available. The long run has elastic demand as both of them are available.