What is Price Elasticity?
Price elasticity is the degree to which quantity is changed by price movements.
Price elasticity is the degree of demand and supply quantity movements in a market from price movements.
Demand and supply diagrams show the effects of price elasticity.
Effects of an increase in prices on quantity
Inelastic (small changes) Elastic (large changes)
The characteristics of goods and services – that is, whether they are unique, habit forming, essential or perishable will effect how producers and consumers respond to price changes in the markets.
There are some interesting real world examples of markets where goods are price inelastic for demand.
Goods that are essential or very desirable, like life saving drugs, the latest iPhone, petrol or gas all are either essential of very desirable goods and so can charge more for the product and not expect fewer sales.
Now to find out more take this Introductory Microeconomics Tutorial Course with explanatory videos, infographics and quizzes.Price Elasticity Tutorial Course Return to Introductory Economics Questions and Answers