elasticity

noun elas·tic·i·ty \ i-ˌla-ˈsti-sə-tē , ˌē-ˌla- , -ˈti-stē \
Updated on: 13 Oct 2017

Definition of elasticity

plural elasticities
1 :the quality or state of being elastic: such as
a :the capability of a strained body to recover its size and shape after deformation :springiness
b :resilience 2
c :the quality of being adaptable
2 :the responsiveness of a dependent economic variable to changes in influencing factors
  • elasticity of demand
  • price elasticity

Recent Examples of elasticity from the Web

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First Known Use of elasticity

1664


Financial Definition of ELASTICITY

elasticity

What It Is

Elasticity is a measure of how much the quantity demanded of a service/good changes in relation to its price, income or supply.

How It Works

If the quantity demanded changes a lot when prices change a little, a product is said to be elastic. This often is the case for products or services for which there are many alternatives, or for which consumers are relatively price sensitive. For example, if the price of Cola A doubles, the quantity demanded for Cola A will fall when consumers switch to less-expensive Cola B.

When there is a small change in demand when prices change a lot, the product is said to be inelastic. The most famous example of relatively inelastic demand is that for gasoline. As the price of gasoline increases, the quantity demanded doesn't decrease all that much. This is because there are very few good substitutes for gasoline and consumers are still willing to buy it even at relatively high prices.

Why It Matters

Elasticity is important because it describes the fundamental relationship between the price of a good and the demand for that good.

Elastic goods and services generally have plenty of substitutes. As an elastic service/good's price increases, the quantity demanded of that good can drop fast. Example of elastic goods and services include furniture, motor vehicles, instrument engineering products, professional services, and transportation services.

Inelastic goods have fewer substitutes and price change doesn't affect quantity demanded as much. Some inelastic goods include gas, electricity, water, drinks, clothing, tobacco, food, and oil.

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To learn more about specific types of elasticity, see the following:

Income Elasticity of Demand: the responsiveness of quantity demanded to a change in income.
Price Elasticity of Demand (PED): the responsiveness of quantity demanded to a change in  price.
Elasticity of Supply: the responsiveness of the quantity supplied to a change in price.


ELASTICITY Defined for Kids

elasticity

noun elas·tic·i·ty \ i-ˌla-ˈsti-sə-tē \

Definition of elasticity for Students

:the quality or state of being easily stretched

Medical Dictionary

elasticity

noun elas·tic·i·ty \ i-ˌlas-ˈtis-ət-ē, ˌē-ˌlas-, -ˈtis-tē \

medical Definition of elasticity

plural elasticities
:the quality or state of being elastic


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