Overview
The elasticity of demand is a crucial concept in economics that helps us understand how consumers react to price changes. It is categorized into different types, including price elasticity, income elasticity, and cross elasticity, each providing insights into consumer behavior. Understanding these c...
Key Terms
Example: If the price of a product increases by 10% and demand decreases by 20%, the elasticity is -2.
Example: Luxury goods often have high price elasticity.
Example: Essential goods like medicine often have inelastic demand.
Example: Non-essential items like luxury cars have elastic demand.
Example: As income rises, demand for luxury goods increases.
Example: If the price of coffee rises, the demand for tea may increase.
Related Topics
Supply and Demand
Understanding how supply and demand interact is fundamental to economics.
beginnerMarket Structures
Different market structures affect pricing and elasticity.
intermediateConsumer Behavior
Consumer choices and preferences influence demand elasticity.
intermediateGovernment Intervention
How government policies impact market outcomes and elasticity.
advancedKey Concepts
Price ElasticityIncome ElasticityCross ElasticityTax Incidence