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Chapter 3 – Elasticity of Demand
Elasticity – the degree to which changes in price affect the
quantity demanded by consumers.
Elastic Demand – small change in price causes a major, opposite
change in demand.
Certain goods tend to have more elastic demand, especially if:
 the product is a luxury – iPhones
 there are readily available substitutes – pan dulce
 the product’s cost represents a large portion of the
consumer’s income – housing
*Elastic goods tend to have flat or almost horizontal demand
Inelastic Demand – change in price causes little impact in the
quantity demanded. Goods or services tend to be inelastic if:
 the product is a necessity – insulin
 there are few or no readily available substitutes
 the product’s cost represents a small proportion of the
consumer’s income
*Inelastic goods tend to have steep or almost vertical demand
Note: Elasticity can change depending on if you are looking at
a specific market or the general market for this good.