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What does elasticity mean? If the demand for a product is inelastic, what are the implications?

What does elasticity mean? If the demand for a product is inelastic, what are the implications?

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Expert Solution

Elasticity is a measure of sensitiveness of quantity change because of a change in price in percentage or proportional change.

The elasticity of demand is measured in three scales for simplicity.

Elastic

Unit elastic

Inelastic

Elastic means the change in quantity demanded is higher than the change in price in proportional or percentage terms.

Unit elastic means the change in quantity demanded is equal to change in price in proportional or percentage terms.

Inelastic demand means the change in quantity demanded is lower than the change in price in proportional or percentage terms.

Ex.

Decrease in a price by 10% increase quantity demanded by 1% is an inelastic demand

the decrease in a price by 10% increases quantity demanded by 15% is elastic demand

decrease in a price by 10% increases quantity demanded by 10% is a unit elastic demand.

It is inelastic

Rahul Sunny answered 2 years ago
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