Law of demand, Elasticity of Demand and Law of supply

Petrol prices climb every few weeks and Mumbai's roads do not empty out. Onion prices double for a season and vegetable vendors sell almost the same quantity as before. Both are the law of demand at work — and both show why a flat rule ("price up, quantity down") is not the whole story. This topic gives you the tool, elasticity, that tells you how much quantity actually moves.

In two minutes

The law of demand says quantity demanded falls as price rises, other things remaining the same; elasticity measures by how much; the law of supply says quantity supplied rises as price rises — and together the three explain how a market price gets set.

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