Question
Elasticity of Demand cannot be measured.
✓
Answer
No, I do not agree with this statement,
Elasticity of demand can be measured in 3 methods i.e. Percentage method, Point method or Total Outlay method.
Elasticity of demand can be measured in 3 methods i.e. Percentage method, Point method or Total Outlay method.
(i) Percentage Method : This method is also known as Arithmetic Method. In this method we compare the percentage of change in demand with percentage of change in price. When we divide the percentage of change in demand by the percentage of change in price, we get Elasticity of demand.
By applying the above formula we can calculate and find the type of elasticity. If the result is one, then elasticity is unitary, if it is more than one, then it is relatively elastic and if it is less than one, it is relatively inelastic.
(ii) Point Method : In this method we can find elasticity of demand at a point on a given demand curve by using the following formula –
(iii) Total Outlay Method : According to this method, elasticity of demand is measured on the basis of expenditure incurred by consumer when the price of a commodity changes.
Total outlay can be calculated by multiplying the price with the quantity demanded i.e. Total Outlay = Price x Quantity Demanded
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