Ratio or Percentage Method: $E_d = \frac{\%\Delta Q}{\%\Delta P}$
Total Expenditure Method: Compares total expenditure before and after price change.
- $E_d > 1$: Total outlay increases with price fall.
- $E_d = 1$: Total outlay remains constant.
- $E_d < 1$: Total outlay decreases with price fall.
Point Method or Geometric Method: Measures elasticity at a specific point on the demand curve.
- $E_d = \frac{\text{Lower segment}}{\text{Upper segment}}$
- On a linear demand curve, elasticity varies from $\infty$ (Y-axis) to 0 (X-axis).

Factors Influencing Elasticity of Demand: Nature of commodity, Availability of substitutes, Number of uses, Habits, Durability, Complementary goods, Income of the consumer, Urgency of needs, Time period, Proportion of expenditure.

Importance of Elasticity of Demand: To a Producer, To Government (taxation), In Factor Pricing, In Foreign Trade, Public Utilities.

4. Supply Analysis

Stock: Total quantity of commodity available for sale with a seller at a particular point of time. (Potential supply)
Supply: Quantity of a commodity offered for sale by producers at a given price during a given period of time. (Flow concept)
Supply Schedule: Tabular representation of price-quantity supplied relationship.
- Individual Supply: Quantity supplied by a single producer.
- Market Supply: Total quantity supplied by all producers.
Supply Curve: Graphical representation of supply schedule. Slopes upwards from left to right (direct relationship between price and quantity supplied).
Determinants of Supply: Price of commodity, State of technology, Cost of Production, Infrastructural facility, Government policy, Natural conditions, Future expectations about price, Other factors (nature of market, prices of other goods, exports/imports, industrial relations, availability of factors).
Law of Supply:
- Statement: "Other things being constant, higher the price of a commodity, more is the quantity supplied and lower the price of a commodity less is the quantity supplied." (Alfred Marshall)
- Symbolically: $S_x = f(P_x)$
- Assumptions: Constant cost of production, Constant technique of production, No change in weather conditions, No change in Government policy, No change in transport cost, Prices of other goods remain constant, No future expectations.
- Exceptions: Supply of labour (backward bending supply curve), Agricultural goods, Urgent need for cash, Perishable goods, Rare goods.
Variations in Supply (due to price change, other factors constant):
- Expansion of supply: Rise in quantity supplied due to rise in price (upward movement along the same supply curve).
- Contraction of supply: Fall in quantity supplied due to fall in price (downward movement along the same supply curve).
Changes in Supply (due to changes in other factors, price constant):
- Increase in supply: Rise in quantity supplied due to favorable changes in other factors (supply curve shifts right).
- Decrease in supply: Fall in quantity supplied due to unfavorable changes in other factors (supply curve shifts left).
Concepts of Cost:
- Total Cost (TC): Total expenditure on factors of