What is the difference between elastic and inelastic demand?

Economics Dec 17, 2020

Expert Solution

The difference between elastic and inelastic demand is that elastic demand is highly responsive to changes in things like price or consumer income, while items that are inelastic will be relatively unresponsive to changes in other economic factors. Elasticity is a relative measure, but economists think of products with an elasticity ratio below 1 as inelastic and one above 1 as elastic. For example, if a cookie manufacturer thinks demand will rise 10% if the price drops by 25%, then the elasticity is .4 and considered inelastic.

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