Author Topic: PRICE ELASTCITY  (Read 946 times)

Offline joel

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PRICE ELASTCITY
« on: May 17, 2009, 05:28:44 pm »
What is price elastic and inelastic for demand

Offline anusha500

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Re: PRICE ELASTCITY
« Reply #1 on: May 17, 2009, 05:38:28 pm »
price elasticy of demand is the degree of responsiveness of quantity demanded to a change in price.
it is calculated by - % change in quantity demanded / % change in price.

if a good is price elastic. then a % change in price will lead to a greater % change in quantity demanded.
ped >1

if a good is price inelastic then a % change in price will lead to a small change in quantity demanded.
ped < 1

Offline MaNa

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Re: PRICE ELASTCITY
« Reply #2 on: May 17, 2009, 05:41:42 pm »
You can think of it like a rubber band: more elastic means it moves more. Elastic demand is more likely to be affected by circumstances. For example, demand for many luxury items is fairly elastic for non-wealthy people because if they lose their jobs, the economy goes into recession, etc., they tend to stop buying the luxury stuff. On the other hand, inelastic demand is a lot less dependent on outside factors. So, even if you lose your job, the economy fails and there is a massive earthquake, you're still going to need to buy bread, salt, etc.
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