Elasticity of demand
Elasticity of demand is an economic concept which measures the change in the quantity demanded that results from a change in price of a good or service, or more specifically elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price. Elasticity of demand can be seen as a measure of the responsiveness or sensitivity of buyers in the quantity they demand for a good or service in reaction to a price change.[1] Elasticity of demand can be divided into three categories, elastic, inelastic and unitary.[1] An elastic response is said to occur when a percentage change in price results in a larger percentage change in quantity demanded, while an inelastic response occurs when a percentage change in price results in a smaller percentage change in quantity demanded. A unitary response occurs in the rare case where a percentage change in price results in an exactly equal percentage change in quantity demanded.
References
- ↑ 1.0 1.1 Shapiro, Milton. "Foundations of the Market-Price System", 2007, page 144-145.