Elasticity of Demand and Supply ICSE Class 10: Types, Method and Factors

What Elasticity of Demand and Supply is about

Weightage: CISCE publishes no chapter weightage. The paper has a compulsory Section A (40 marks: 16 one-mark MCQs and three 8-mark questions of four 2-mark parts) and Section B, where you answer any four of six 10-mark questions (two 5-mark parts each).Source: CISCE ICSE Economics (641) specimen paper structure, 2025, retained for 2027 by the CISCE circular of 9 October 2026

Key concepts

Price elasticity of demand and the percentage method

Price elasticity of demand is the degree of responsiveness of the quantity demanded of a commodity to a change in its price, other things remaining constant.

Percentage method:
Ed = percentage change in quantity demanded / percentage change in price
where percentage change in quantity demanded = (change in quantity / original quantity) x 100, and percentage change in price = (change in price / original price) x 100.

Because price and quantity demanded move in opposite directions, the result has a minus sign, which is usually ignored when comparing degrees.

Interpretation: Ed greater than 1 means elastic; Ed less than 1 means inelastic; Ed equal to 1 means unitary.

Worked example

(2 marks) Define price elasticity of demand and give the formula of the percentage method.

Try it first, then show the solutionSolution

1. Price elasticity of demand is the degree of responsiveness of quantity demanded to a change in price - 1 mark.
2. Ed = percentage change in quantity demanded / percentage change in price - 1 mark.

Answer: Price elasticity of demand measures how responsive quantity demanded is to a change in price. By the percentage method, Ed = percentage change in quantity demanded divided by percentage change in price.

Degrees of elasticity of demand and their curves

1. Perfectly elastic demand (Ed = infinity): a slight change in price causes an infinite change in quantity demanded; at the given price any quantity is bought. Curve: a horizontal line parallel to the X-axis.
2. Perfectly inelastic demand (Ed = 0): quantity demanded does not change at all whatever the price. Curve: a vertical line parallel to the Y-axis.
3. Unitary elastic demand (Ed = 1): the percentage change in quantity demanded equals the percentage change in price. Curve: a rectangular hyperbola (a smooth curve bending towards both axes).
4. Relatively elastic demand (Ed greater than 1): quantity demanded changes by a larger percentage than price. Curve: a flatter downward-sloping curve. Example: luxuries such as cars and air-conditioners.
5. Relatively inelastic demand (Ed less than 1): quantity demanded changes by a smaller percentage than price. Curve: a steeper downward-sloping curve. Example: necessities such as salt and food grains.

When naming a horizontal or vertical curve, always include the word 'perfectly'.

Worked example

(2 marks) Picture 1 shows a horizontal demand curve; Picture 2 shows a vertical demand curve. Identify the type of elasticity in each.

Try it first, then show the solutionSolution

1. Picture 1 (horizontal): perfectly elastic demand, Ed = infinity - 1 mark.
2. Picture 2 (vertical): perfectly inelastic demand, Ed = 0 - 1 mark.

Answer: Picture 1: perfectly elastic demand (Ed = infinity). Picture 2: perfectly inelastic demand (Ed = 0).

Factors affecting elasticity of demand

1. Nature of the commodity: necessities (salt, food grains, medicines) have inelastic demand; luxuries (cars, jewellery) have elastic demand; comforts lie between.
2. Availability of substitutes: goods with close substitutes (one brand of soap or soft drink) have elastic demand; goods with few substitutes (salt) have inelastic demand.
3. Number of uses: goods with many uses (electricity, milk) have more elastic demand.
4. Possibility of postponement: demand that can be put off (a new car) is elastic; demand that cannot be postponed (woollens in winter, medicines) is inelastic.
5. Proportion of income spent: goods that take a tiny share of income (salt, matchboxes) have inelastic demand; goods that take a large share are elastic.
6. Habits: goods consumed out of habit (tea, coffee) have inelastic demand.
7. Time period: demand is more elastic in the long run, when consumers can find substitutes.
8. Level of price: very cheap and very expensive goods tend to have inelastic demand.
9. Income level: the rich are less sensitive to price changes than the poor.

Worked example

(2 marks) State whether the demand is elastic or inelastic, with a reason: (a) salt bought by households; (b) a consumer postpones buying a car to get a year-end discount.

Try it first, then show the solutionSolution

1. (a) Inelastic: salt is a necessity, has no close substitute and takes a tiny share of income - 1 mark.
2. (b) Elastic: buying a car can be postponed and it takes a large share of income, so buyers respond to price changes - 1 mark.

Answer: (a) Inelastic, because salt is a necessity with no substitute and costs very little. (b) Elastic, because the purchase can be postponed and a car is expensive, so buyers wait for a lower price.

Elasticity of supply and the percentage method

Price elasticity of supply is the degree of responsiveness of the quantity supplied of a commodity to a change in its price, other things remaining constant.

Percentage method:
Es = percentage change in quantity supplied / percentage change in price

Because price and quantity supplied move in the same direction, Es is positive.

(Remember the definition of supply itself includes price and time: the quantity a seller is willing and able to offer at a given price during a given period of time.)

Worked example

(2 marks) What is the formula for the percentage method of calculating price elasticity of supply?

Try it first, then show the solutionSolution

1. Es = percentage change in quantity supplied / percentage change in price - 1 mark.
2. Percentage change in quantity supplied = (change in quantity supplied / original quantity supplied) x 100; percentage change in price = (change in price / original price) x 100 - 1 mark.

Answer: Es = (percentage change in quantity supplied) / (percentage change in price), where each percentage change is the change divided by the original value, multiplied by 100.

Degrees of elasticity of supply and their curves

1. Perfectly elastic supply (Es = infinity): at the given price, any quantity will be supplied; a horizontal supply curve.
2. Perfectly inelastic supply (Es = 0): quantity supplied does not change with price; a vertical supply curve (for example fresh fish already brought to market, or the very short period).
3. Unitary elastic supply (Es = 1): percentage change in quantity supplied equals percentage change in price; any straight-line supply curve passing through the origin.
4. Relatively elastic supply (Es greater than 1): quantity supplied changes more than proportionately; a straight-line supply curve that, when extended, meets the price (Y) axis.
5. Relatively inelastic supply (Es less than 1): quantity supplied changes less than proportionately; a straight-line supply curve that, when extended, meets the quantity (X) axis.

To draw relatively elastic supply: price on the Y-axis, quantity supplied on the X-axis; draw an upward-sloping straight line SS starting from a point on the Y-axis above the origin; label the axes and the curve, and mark Es greater than 1.

Worked example

(1 mark) A straight-line supply curve starts from the origin and slopes upward. What is its elasticity?

Try it first, then show the solutionSolution

1. Any straight-line supply curve through the origin has unit elasticity, whatever its slope.

Answer: Unitary elastic supply (Es = 1).

Factors affecting elasticity of supply

1. Nature of the commodity: perishable goods (vegetables, fish, milk) have inelastic supply because they cannot be stored or held back; durable goods have more elastic supply.
2. Time period: in a very short period supply is almost fixed (inelastic); over a longer period producers can expand capacity, so supply becomes elastic.
3. Behaviour of costs: if the cost per unit rises sharply as output expands, supply is inelastic; if costs stay steady, supply is elastic.
4. Technique of production: simple techniques allow quick changes in output (elastic); complex techniques with long production periods make supply inelastic.
5. Availability of inputs and spare capacity: if raw materials, labour and idle capacity are available, supply can expand easily (elastic).
6. Natural factors: farm output depends on seasons and weather, so its supply is inelastic in the short run.
7. Expectations and risk-taking: if producers expect prices to keep rising, they may hold back supply; willingness to take risks makes supply more responsive.
8. Number of producers: more producers make market supply more elastic.

Worked example

(2 marks) Why is the supply of vegetables inelastic in the short run?

Try it first, then show the solutionSolution

1. Vegetables are perishable and cannot be stored, so sellers must sell what they have whatever the price - 1 mark.
2. Output cannot be increased quickly because crops take time to grow - 1 mark.

Answer: Vegetables are perishable, so what is in the market must be sold at whatever price; and because crops take time to grow, farmers cannot increase supply quickly when price rises.

Elasticity of Demand and Supply in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Elasticity of Supply: Degrees and Factors
• Price Elasticity of Demand: Types and Factors

Elasticity of Demand and Supply: key facts

Elasticity of demand

Ed = % change in quantity demanded / % change in price

Minus sign usually ignored.

Elasticity of supply

Es = % change in quantity supplied / % change in price

Positive.

Percentage change

(Change / original value) x 100

Degrees

Perfectly elastic (infinity); perfectly inelastic (0); unitary (1); relatively elastic (>1); relatively inelastic (<1)

Demand curve shapes

Horizontal = perfectly elastic; vertical = perfectly inelastic; rectangular hyperbola = unitary; flat = elastic; steep = inelastic

Straight-line supply curves

Through origin = unitary; from Y-axis = relatively elastic; from X-axis = relatively inelastic

How the board asks Elasticity of Demand and Supply

The question patterns to expect, and the method that works for each.

Tricks to remember Elasticity of Demand and Supply

Short memory aids. Say each one aloud once, then use it on a question the same day.

• H-V rule

  Horizontal = perfectly elastic (infinite); Vertical = perfectly inelastic (zero).

  Use it when: Identifying curves.

• Supply line start points

  Origin = One (unitary); Y-axis = elastic (above 1); X-axis = inelastic (below 1).

  Use it when: Supply curves.

• N-S-U-P-P-H-T

  Nature, Substitutes, Uses, Postponement, Proportion of income, Habit, Time.

  Use it when: Factors of demand elasticity.

Elasticity of Demand and Supply: board-level solved questions

Ordered from board level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section B style)

Read the situation, then answer every part. In the board paper this is a 10-mark question split into 2 + 2 + 2 + 4 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Elasticity of Demand and Supply

The slips examiners see most often, and what to write instead.

• ✗Mistake: Missing the word 'perfectly'

  CISCE examiners' comments, 2024: candidates wrote 'elastic' instead of 'perfectly elastic' and 'inelastic' instead of 'perfectly inelastic' for horizontal and vertical curves.

  ✓Do this: Horizontal = perfectly elastic; vertical = perfectly inelastic.

  Usually costs: 1 mark each.

• ✗Mistake: Misjudging a supply curve through the origin

  CISCE examiners' comments, 2024: candidates overlooked that the supply curve starts at the origin and misjudged the degree.

  ✓Do this: Straight line through the origin = unitary elastic, whatever the slope.

  Usually costs: The full mark.

• ✗Mistake: Writing the demand formula for supply

  CISCE examiners' comments, 2024: candidates wrote the formula for demand instead of supply.

  ✓Do this: Read the question; supply uses quantity supplied.

  Usually costs: 1 to 2 marks.

• ✗Mistake: Degree without reasons; missing 'time'

  CISCE examiners' comments, 2024 and 2025: candidates identified the degree but gave no detailed reason, omitted 'time' in the definition of supply, and did not label graphs properly; some found classifying goods by elasticity difficult.

  ✓Do this: Every classification needs a factor-based reason; definitions need price and time; graphs need labels.

  Usually costs: 1 to 3 marks.

Practice questions on Elasticity of Demand and Supply

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQBoard level

   When the demand curve is a rectangular hyperbola, elasticity of demand is:
   (a) zero
   (b) one
   (c) infinity
   (d) greater than one

   Hint

   Equal percentage changes.

   Answer

   (b) one (unitary elastic).

2. Q2 · 1 mark · MCQHarder board level

   A straight-line supply curve that starts from the X-axis shows:
   (a) relatively elastic supply
   (b) relatively inelastic supply
   (c) unitary elastic supply
   (d) perfectly elastic supply

   Hint

   X-axis start.

   Answer

   (b) relatively inelastic supply.

3. Q3 · 2 marks · Very short answerBoard level

   Why is the demand for salt inelastic? Give two reasons.

   Hint

   Necessity, share of income.

   Answer

   Salt is a necessity with no close substitute, and it takes a very small share of income, so a price change hardly affects the quantity bought.

4. Q4 · 2 marks · Very short answerHarder board level

   Why is demand more elastic in the long run than in the short run?

   Hint

   Time to adjust.

   Answer

   In the long run consumers have time to find substitutes and change habits, so they respond more to price changes; in the short run they cannot adjust quickly.

5. Q5 · 2 marks · Very short answerBoard level

   Distinguish between relatively elastic and relatively inelastic demand with an example each.

   Hint

   Greater or less than one.

   Answer

   Relatively elastic: quantity demanded changes by a larger percentage than price (Ed > 1), e.g. cars. Relatively inelastic: it changes by a smaller percentage (Ed < 1), e.g. food grains.

6. Q6 · 5 marks · Long answerHarder board level

   Explain any five factors affecting the elasticity of demand.

   Hint

   N-S-U-P-P-H-T.

   Answer

   (1) Nature of the commodity: necessities inelastic, luxuries elastic. (2) Substitutes: more substitutes, more elastic. (3) Number of uses: more uses, more elastic. (4) Postponement: postponable demand is elastic. (5) Proportion of income: small share, inelastic (also habits, time period, price level).

7. Q7 · 5 marks · Long answerHOTS / competency

   Describe the five degrees of elasticity of supply with the shape of each curve.

   Hint

   Horizontal, vertical, origin, Y, X.

   Answer

   (1) Perfectly elastic: horizontal line (Es = infinity). (2) Perfectly inelastic: vertical line (Es = 0). (3) Unitary: straight line through the origin (Es = 1). (4) Relatively elastic: straight line meeting the Y-axis (Es > 1). (5) Relatively inelastic: straight line meeting the X-axis (Es < 1).

8. Q8 · 2 marks · Very short answerHOTS / competency

   'Supply of agricultural goods is inelastic in the short run.' Give two reasons.

   Hint

   Season and perishability.

   Answer

   (1) Crops take a full season to grow, so output cannot be raised quickly when prices rise. (2) Many farm goods are perishable and depend on weather, so supply cannot be adjusted easily.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.What is Ed for a vertical demand curve?Show answer

   Zero (perfectly inelastic).

2. 2.What is Es for a straight supply line through the origin?Show answer

   One (unitary).

3. 3.Give the formula for Ed.Show answer

   % change in quantity demanded / % change in price.

4. 4.Name a good with inelastic demand.Show answer

   Salt (or medicines, food grains).

5. 5.Are numerical problems on elasticity tested?Show answer

   No.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Ed = %ΔQd / %ΔP; Es = %ΔQs / %ΔP.
• ☐Degrees: perfectly elastic (horizontal), perfectly inelastic (vertical), unitary, relatively elastic, relatively inelastic.
• ☐Demand factors: nature, substitutes, uses, postponement, share of income, habits, time, price level.
• ☐Supply lines: origin = 1; Y-axis start = >1; X-axis start = <1.
• ☐Supply factors: perishability, time, costs, technique, inputs and capacity, nature, expectations.

Elasticity of Demand and Supply: frequently asked questions