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About Business Basics
Business Basics are AI-generated explanations prepared with access to the complete collection, human-reviewed prior to publication. Short and simple, covering business fundamentals.
Topics Covered
- Elasticity of demand concept
- Price elasticity of demand
- Factors influencing elasticity
- Methods of measuring elasticity
- Cross and income elasticity
Talk Citation
(2025, September 30). Elasticity of demand [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved September 30, 2025, from https://doi.org/10.69645/ETZW4877.Export Citation (RIS)
Publication History
- Published on September 30, 2025
Transcript
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0:00
Elasticity of demand is a
key economic concept showing
how sensitive the quantity
demanded of a product
is to price changes.
For example, if a bad season
causes orange prices to rise,
people may buy much less,
or demand may stay steady.
Elasticity quantifies
this responsiveness
to price and other factors.
It is crucial for economists,
businesses setting prices,
policymakers imposing taxes,
and anyone predicting
market reactions.
For instance, fuel prices
can greatly affect consumption,
while demand for
necessities like
bread changes little,
regardless of price.
Price elasticity
of demand (PED)
measures the percentage
change in quantity
demanded from a one percent
change in price.
With “elastic” demand,
a small price rise causes a
big drop in quantity bought—seen
in luxury holidays
and branded clothes,
as consumers can easily cut
back or delay purchases.
Conversely, “inelastic”
demand means
price changes barely
affect quantity bought;
everyday essentials or
addictive items like milk,
bread, and cigarettes are
still purchased
regardless of price.
Perfectly elastic and
perfectly inelastic demand are
theoretical extremes, shown by
horizontal or vertical
demand curves
and indicating total
responsiveness
or none at all, respectively.
What influences elasticity?
Factors include the
availability of substitutes,
whether the good is a
necessity or luxury,