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Now that you have a general idea of what elasticity is, let’s consider some of the factors that can help us predict whether demand for a product is likely to be elastic or inelastic. The following are important considerations:
With these considerations in mind, take a moment to see if you can figure out which of the following products have elastic demand and which have inelastic demand. It may be helpful to remember that when the buyer is insensitive to price, demand is inelastic.
Self Check: Explaining ElasticityAnswer the question(s) below to see how well you understand the topics covered in the previous section. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times. You’ll have more success on the Self Check if you’ve completed the two Readings in this section. Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section. When buyers are relatively unresponsive to a price change then we say the demand for that product is?Inelastic demand means that consumers of that good are not highly sensitive (unresponsive) to price changes. If the price of an inelastic good, say cigarettes, rises by, say, 10 percent, sales maybe will decrease by only 1 percent.
What will the demand curve look like if buyers are completely unresponsive to price changes?Inelastic demand is largely unresponsive to changes in price, so the demand will remain the same whether the price goes up or down. Inelastic demand is graphically represented by a steep demand curve. The steeper the curve, the more inelastic the demand for that product is.
When quantity demanded is completely unresponsive to price what is the value?The case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero.
When there is no change in demand when price changes it is called?When the demand of a quantity does not change as a result of a change in the price of a commodity, the demand of that commodity is called a perfectly inelastic demand. In this case, the elasticity of demand is zero.
What is the responsiveness of consumers to price changes called?The price elasticity of demand measures the responsiveness of quantity demanded to changes in price; it is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
What does it mean when a product has inelastic demand?"Inelastic" is an economic term referring to the static quantity of a good or service when its price changes. Inelastic demand means that when the price goes up, consumers' buying habits stay about the same, and when the price goes down, consumers' buying habits also remain unchanged.
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