who gave the concept of elasticity of demand
Price elasticity of demand Together with the concept of an economic "elasticity" coefficient, Alfred Marshall is credited with defining PED ("elasticity of demand") in his book Principles of Economics, published in 1890.[20] He described it thus: "And we may say generally:â€” the elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price".[21] He reasons this since "the only universal law as to a person's desire for a commodity is that it diminishes... but this diminution may be slow or rapid. If it is slow... a small fall in price will cause a comparatively large increase in his purchases. But if it is rapid, a small fall in price will cause only a very small increase in his purchases. In the former case... the elasticity of his wants, we may say, is great. In the latter case... the elasticity of his demand is small."[22] Mathematically, the Marshallian PED was based on a point-price definition, using differential calculus to calculate elasticities.[23]
Bid rent theory Although later used in the context of urban analysis, though not yet using this term, the bid rent theory was first developed in an agricultural context. One of the first theoreticians of bid rent effects was David Ricardo, according to whom the rent on the most productive land is based on its advantage over the least productive, the competition among farmers ensuring that the full advantages go to the landlords in the form of rent. This theory was later developed by J. H. von Thünen, who combined it with the notion of transport costs. His model implies that the rent at any location is equal to the value of its product minus production costs and transport costs. Admitting that transportation costs are constant for all activities, this will lead to a situation where activities with the highest production costs are located near the marketplace, while those with low production costs are farther away.