Elasticity (economics) facts for kids
In economics, people talk about elasticity of an economic variable, usually supply or demand, in relation to another economic variable such as income or price. The elasticity of a variable is a measure of how much the variable changes in response to a change in a second variable.
If the price for a good with a price-elastic demand goes up, the demand for it will go down. For example, people will buy fewer DVDs if DVDs get more expensive − DVDs have a price-elastic demand.
If a good has a completely price-inelastic demand, the demand for it will not be affected by the price of it. For example, if the price of salt increases, people will not buy less of it. They need their daily salt intake. The demand of salt is therefore price-inelastic.
Elasticity is often measured in percents. If a 2% increase in price causes people to buy 1% fewer of a product, it has a price elasticity of demand of -0.5.
- Price elasticity of demand
- Income elasticity of demand
- Cross elasticity of demand
- Price elasticity of supply
|Topics in microeconomics|
|Scarcity • Opportunity cost • Supply and demand • Elasticity • Economic surplus • Economic shortage • Aggregation of individual demand to total, or market, demand • Consumer theory • Production, costs, and pricing • Market forms • Welfare economics • Market failure|
Elasticity (economics) Facts for Kids. Kiddle Encyclopedia.