Elastic vs Inelastic Demand
Four main types of elasticity
When determining whether demand for a product is inelastic or elastic, people most frequently discuss price elasticity. However, economists also study other types of [elasticity](https://www. indeed. com/career-advice/career-development/formula-for-elasticity-of-demand). Here are the four types of elasticity in economics:
What is economic demand?
Demand in economics is the term used to describe consumer willingness or desire to buy a good or service. Predicting demand has many factors, including price, availability and exclusivity. Target markets differ further in terms of their behaviors and income levels.
What is inelastic demand?
Calculating inelastic demand
Economists calculate inelastic demand by first selecting a product. They subtract the percentage change in the price from the percentage change in the number of items sold. The demand ratio is equal to 1% when changes in quantity reflect the same percentage rate as changes in price. A percentage change of less than 1% indicates a product’s inelastic demand. For instance, if an item’s price increases by 15% but consumer behavior only shifts by 2%, the demand ratio is less than 1%.
Examples of products with inelastic demand
Products or services that are essential for a person’s survival or basic needs are those with inelastic demand. Because there aren’t many alternatives available to consumers, purchasing patterns for these products typically don’t change much in relation to price. Some items on the list are not essentials, and demand is inelastic as a result of the distinct social value attached to rare or sought-after items. An example of this would be diamonds.
A list of goods and services with inelastic demand is provided below:
What is elastic demand?
When a product’s demand is highly dependent on price, this is known as elastic demand. Price is a major economic factor that influences demand, but how it influences the purchase of specific goods or services varies. Demand and consumption patterns can be drastically altered by even a small price change. The demand is very flexible, stretching and changing shape like a rubber band.
Calculating elastic demand
The rate at which consumers purchase an item changes along with the price of an item with elastic demand. By dividing the percentage change in the quantity of goods sold by the percentage change in price, economists can determine elastic demand.
The demand ratio equals 1% when these two percentages change at the same rate. Products whose demand ratio is 1% or more or greater have elastic demand. The demand ratio is greater than 1%, for instance, if the price of an item drops by 10% but demand increases by 25%.
Examples of products with elastic demand
Elastic goods typically have lots of substitutes. They are often luxury items, services or plans. Due to the variety of options, some products with elastic demand, such as foods or toiletries, make the list. For instance, customers are likely to switch brands if the cost of one deodorant brand increases. In this instance, demand goes down.
The following list of goods and services typically exhibit elastic demand:
What is the difference between inelastic and elastic demand?
Demand can be elastic or inelastic depending on how easily changes can affect consumer behavior. Try to picture an elastic object, such as a rubber band, and an inelastic object, such as twine. You can stretch and change rubber band with little effort. The same is true of elastic demand in economics. Demand changes dramatically when something like price or supply even slightly changes.
A piece of twine would not stretch nearly as much as the rubber band with the same amount of effort. Like twine, inelastic demand doesnt change much when fluctuations occur.
What are the factors that impact elasticity?
Economic demand varies as circumstances, availability and social norms fluctuate. The following five elements can influence how elastic the demand for goods or services is:
FAQ
What is the difference of elastic and inelastic?
A demand that is highly responsive to price changes in terms of quantity demanded is said to be elastic. Small changes in quantity demanded as a result of price changes are referred to as inelastic demand.
What is the difference between elastic and inelastic quizlet?
The main distinction between collisions that are perfectly elastic and inelastic is that in collisions that are perfectly elastic, the total kinetic energy of the objects stays the same, whereas in collisions that are perfectly inelastic, the total kinetic energy of the objects changes.
