IGCSE/GCSE/O & A Level/IB/University Student Forum

Qualification => Subject Doubts => IGCSE/ GCSE => Sciences => Topic started by: joel on May 17, 2009, 05:28:44 pm

Title: PRICE ELASTCITY
Post by: joel on May 17, 2009, 05:28:44 pm

What is price elastic and inelastic for demand

Title: Re: PRICE ELASTCITY
Post by: anusha500 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

Title: Re: PRICE ELASTCITY
Post by: MaNa 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.