Elastic demand

What is elastic demand?

Elastic demand is that price elasticity of demand where the demand varies remarkably according to the price of the product. In this way, a change in the value of the good will have a proportional impact on the quantity demanded.

Definitely, If the price of a product rises, its demand falls, and therefore this is called elastic. It usually happens with those products that have substitute goods.

The way in which demand adapts to the change that has occurred is also known as price elasticity, since a change occurs in the percentage of demand from the change that occurred in the percentage of the price.

Elastic demand graph

Let's take the example of an olive oil. If he price of this product increases, for example from $ 20 to $ 50, your demand may drop (as we see in the graphic below) since the product can be substituted for another, such as sunflower oil, which is usually cheaper.

Elastic demand graph.

Likewise, there is the case of perfectly elastic suit. Although it is difficult to find a good that meets this condition, we could put vegetables as an example: If a seller increases the price of these, it is possible that the buyer (plaintiff) will buy elsewhere cheaper, so the amount of demand would drop considerably.

The perfectly elastic suit It is graphed as follows:

Graph of perfectly elastic demand.

Elastic demand and inelastic demand

The elastic demand is that demand that before a change in the price of the good, it is drastically affected, while the inelastic demand consists of the demand that before a change in the price of the product, it is not so affected.

Example of elastic goods

To better understand elastic demand, some examples of elastic goods are proposed below:

• If a vegetable seller The price of these increases, buyers can choose to go to another place that offers the same product at a lower price, therefore the demand for vegetables in that greengrocer will be lower.
• Yes one bakery As the price of the breads it sells increases, the consumer will be able to buy the same merchandise in another establishment that offers a lower price, thus reducing demand.