Economics Supply And Demand Questions Medium
Price elastic demand and price inelastic demand are two concepts that describe the responsiveness of quantity demanded to changes in price. The main difference between the two lies in the degree of responsiveness.
Price elastic demand refers to a situation where a change in price leads to a relatively larger change in quantity demanded. In other words, the demand is sensitive to price changes. When demand is elastic, consumers are highly responsive to price fluctuations, and a small increase in price will result in a significant decrease in quantity demanded, and vice versa. This is typically the case for goods or services that have readily available substitutes, where consumers can easily switch to alternatives if the price changes. Examples of price elastic goods include luxury items, non-essential goods, and goods with many close substitutes.
On the other hand, price inelastic demand refers to a situation where a change in price leads to a relatively smaller change in quantity demanded. In this case, demand is less sensitive to price changes. When demand is inelastic, consumers are less responsive to price fluctuations, and even a significant increase in price will result in a relatively small decrease in quantity demanded, and vice versa. This is typically the case for goods or services that are necessities, have limited substitutes, or are habit-forming. Examples of price inelastic goods include essential goods like food, medicine, and utilities.
In summary, the key difference between price elastic demand and price inelastic demand lies in the degree of responsiveness to price changes. Elastic demand is highly responsive, resulting in larger changes in quantity demanded, while inelastic demand is less responsive, resulting in smaller changes in quantity demanded.