Elasticity

• In a stagnant economy

  Demand is more sensitive to price and thus elasticity is greater
• Goods/services with low elasticity

  • Necessities such as milk and gasoline
• Goods/services with many substitutes


  • Cookies and candy/ice cream
• Result is greater than or equal to 1

  The good or service is elastic
• An item has many possible substitutes

  Its demand will be more elastic
• Result is less than 1

  The good or service is inelastic
• Goods/services with high elasticity

  • Luxury goods such as high-end vehicles and electronics
• Goods/services with few substitutes

  • Gasoline
• An item has few substitutes

  Its demand will be less elastic
• Elasticity


  A measure of a variable's reaction to a change in another variable