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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 curves. 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 curves. Note: Elasticity can change depending on if you are looking at a specific market or the general market for this good.