Demand elasticity refers to the change in the required quantity of a product, due to the change in the factors on which demand depends. These variables are the price, the price of related goods, income and so on. Unless otherwise specified, the price elasticity defined as the demand elasticity, which is the degree of reactivity of a product with respect to the change in price. It can be elastic or inelastic for a particular commodity.
To understand the difference between elastic and inelastic demand, see the article presented below.
|Sense||When a small change in the price of a product translates into a substantial change in the quantity required, known as elastic demand.||The inelastic demand refers to a change in the price of a good result in net or slight variation in the quantity requested.|
|Elasticity Quotient||More than equal to 1||Less than 1|
|Price and total revenue||Move in the opposite direction||Move in the same direction|
|Goods||Comfort and luxury||need|
Definition of elastic demand
The changing demand, when the price of the product increases or decreases, known as elastic demand or elasticity of demand. This demand is defined as a price sensitive demand.
It means that a small change in the price of the product can lead to a greater change in the quantity required by consumers, that is, if the price of a product is increased, then consumers will stop buying the goods or switch to substitutes or buy less quantities of the product, or they will wait for prices to become normal. On the other hand, if the price drops, consumers will start buying a little more quantity of the product, or attract a little more customers.
Definition of the inelastic demand
The demand would be inelastic when the demand for the given product or service does not change in response to price fluctuations. This request is not very price sensitive.
Items by necessity or necessity are goods that have an inelastic demand, that is, water, salt, soap, gasoline, etc. Or the items people are addicted to, such as liquor, cigarettes, etc. Or items that don't have similar substitutes like medicines. When the demand for the given inelastic product, regardless of the price, people will not stop buying it. Likewise, if the price drops, there won't be many changes in the quantity demanded by consumers.
Key differences between elastic and inelastic demand
The differences between elastic and inelastic demand can be clearly expressed for the following reasons:
- Elastic demand when a small change in the price of an asset causes a greater change in the quantity required. Inelastic demand means a change in the price of an asset, it will not have a significant effect on the quantity requested.
- The elasticity of the demand can be calculated as a percentage variation of the price of the goods with respect to the percentage variation of the price, if the elasticity coefficient of the demand greater than, equal to 1, then the elastic demand, but if lower than it is said that the question is inelastic.
- When the elastic demand, the low curve. Conversely, if the demand is inelastic, the slope will be steep.
- In the case of elastic demand, the price and total revenue move in the opposite direction, however, with inelastic demand, the price and total revenue move in the same direction.
- The objects of comfort and luxuries have an elastic demand, while the objects of necessity have a non-elastic demand.
Price elasticity of demand
|and> 1||Relatively elastic demand.|
|ed = 1||Unitary elastic demand|
|and <1||Relatively inelastic question|
|ed =||Perfectly elastic demand|
|ed = 0||Perfectly inelastic question|
The elasticity of demand represents the extent to which the change in the price of an asset will influence the quantity required by consumers. Products with substitutes that are not similar or not have an inelastic demand. Compared to products with a large number of substitutes, they have an elastic demand because consumers switch to different substitutes, if there is a small change in their prices. Therefore, true to say that the less the substitutes, the more inelastic demand. In addition to this, if a huge part of the income is spent on the purchase of the product, the demand for it is also elastic, for consumers who are highly price sensitive.