Demand elasticity is the change in quantity demanded at a particular price. If a large change in price results in little change in the quantity demanded, then demand is considered inelastic. If a small change in price results in large changes in the quantity demanded, then demand is considered elastic.
Products that have good substitutes have a high elasticity of demand, since if the price of one substitute increases, buyers can switch to another substitute. For example, if the price of beef increases, then people will buy more chicken, ham, pork, or some other meat. Beef is considered an elastic product.
On a supply and demand graph, elastic demand has a more gradual slope while inelastic demand has a more vertical slope.
Products that have fewer or no substitutes have a high inelasticity of demand since if the price increases, there are no substitute products buyers can switch to. For example, if gasoline and oil prices increase, buyers have to pay the higher price because there are no close substitutes.<< Back to Glossary Index