Elasticity

Elasticity

1. 'the proportionate responsiveness of a second variable to an initial proportionate change in the first variable'

2. PRICE ELASTICITY OF DEMAND

   • the proportionate change in demand following an initial proportionate change in the goods own price
   • if total expenditure increases in response to a price fall, demand is elastic
   • if total expenditure decreases in the response to a price fall, demand is inelastic
   • if total consumer expenditure remains constant in response to a price fall, demand is neither elastic or inelastic