inelastic demand

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When the elasticity of demand is less than 1. If demand is inelastic a proportional fall in price produces a smaller proportional increase in quantity demanded. Total revenue thus falls when quantity increases, and marginal revenue is negative. Therefore, a price on an inelastic part of the demand curve will not be chosen by a profit-maximizing monopolist, but can occur at the equilibrium in a competitive industry.

Subjects: Economics.

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