Elasticity is how sensitive supply or demand are to a change in price. A product is elastic if the price change causes a big change in quantity demanded. A product is inelastic is the price change causes a small change in the amount demanded. There are three questions you can ask to determine the elasticity of a product. Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income?
Can the purchase be delayed? If the consumer’s need for the product isn’t urgent, the purchase can wait. An elastic example of this would be a new phone. Over time, the price would drop. An inelastic example would be gasoline. You must have it in order to go about your daily driving, and cannot go without buying
Can the purchase be delayed? If the consumer’s need for the product isn’t urgent, the purchase can wait. An elastic example of this would be a new phone. Over time, the price would drop. An inelastic example would be gasoline. You must have it in order to go about your daily driving, and cannot go without buying