inelastic

adjective in·elas·tic \ ˌi-nə-ˈla-stik \
Updated on: 13 Oct 2017

Definition of inelastic

:not elastic: such as
a :slow to react or respond to changing conditions

inelasticity

play \ˌi-ni-ˌla-ˈsti-s(ə-)tē, (ˌ)i-ˌnē-ˌla-\ noun

Recent Examples of inelastic from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'inelastic.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of inelastic

1748


Financial Definition of INELASTIC

inelastic

What It Is

Something is inelastic when its price does not vary with the price of another item. It the business world, the term most often refers to how little the price of a good or service changes when the supply of that good or service changes.

The formula for elasticity is:

Elasticity = % Change in Quantity/% Change in Price

How It Works

Let's assume that when gas prices increase by 50%, gas purchases fall by just 2%. Using the formula above, we can calculate that gasoline is pretty inelastic:

Elasticity = -2%/50% = -0.04

Thus, we can say that for every percentage point that gas prices increase, gas purchases decrease by four one-hundredths of a percent. The price of gas is inelastic.

Why It Matters

If demand changes a lot when prices change a little, the demand for a product is elastic. This often is the case for products or services for which there are many alternatives or for which consumers are price sensitive.

The opposite is also true: When there is a small change in demand when prices change a lot, the product is inelastic. This is often the case for products and services that people consider necessities and will purchase at almost any price. The presence of few good substitutes and the presence of customer loyalty are also factors. At some point, however, there is a price at which demand for any good or service will fall to zero or near zero.


INELASTIC Defined for Kids

inelastic

adjective in·elas·tic \ ˌin-ə-ˈlas-tik \

Definition of inelastic for Students

:not elastic

Medical Dictionary

inelastic

adjective in·elas·tic \ ˌin-i-ˈlas-tik \

medical Definition of inelastic

:not elastic

inelasticity

play \-i-ˌlas-ˈtis-ət-ē, -ˌē-ˌlas-, -ˈtis-tē\ noun plural inelasticities

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