Economics Elasticity Of Supply Questions Medium
The concept of price elasticity of demand for inferior goods refers to the responsiveness of the quantity demanded of an inferior good to changes in its price. An inferior good is a type of product for which demand decreases as consumer income increases.
In the case of price elasticity of demand for inferior goods, it is generally expected that the demand for these goods will be relatively elastic. This means that a small change in price will result in a proportionately larger change in the quantity demanded.
When the price of an inferior good increases, consumers with higher incomes tend to switch to higher-quality substitutes, leading to a decrease in the quantity demanded. Conversely, when the price of an inferior good decreases, consumers may switch back to it, resulting in an increase in the quantity demanded.
The price elasticity of demand for inferior goods is typically negative, indicating an inverse relationship between price and quantity demanded. However, the magnitude of the elasticity will determine the degree of responsiveness. If the elasticity is greater than 1, demand is considered elastic, indicating a relatively large change in quantity demanded in response to a small change in price. On the other hand, if the elasticity is less than 1, demand is considered inelastic, indicating a relatively small change in quantity demanded in response to a change in price.