elasticity of demand

Show Summary Details

Quick Reference

The ratio between proportional change in quantity demanded and proportional change in price. Counter to the general definition of elasticity, it is common to insert a minus sign in the definition, so where q is quantity and p is price, elasticity of demand is given byThis is to make the elasticity of demand positive, to avoid confusion when discussing larger or smaller elasticities. If demand is elastic, εd > 1; the proportional rise in quantity is more than a proportional cut in price, so total spent rises as price falls. This is contrasted with inelastic demand, where εd < 1, so total spent falls as price falls. See also cross-price elasticity of demand; income elasticity of demand.

Subjects: Economics.

Reference entries

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.