Hinnaelastus

Hinnaelastus refers to the concept of price elasticity of demand in economics. It measures how sensitive the quantity demanded of a good or service is to a change in its price. In simpler terms, it tells us how much the demand for a product will change if its price goes up or down.

There are different degrees of price elasticity. If a small change in price leads to a large change in quantity demanded, the demand is considered elastic. This often applies to goods with many substitutes or luxury items. Conversely, if a change in price causes only a small change in quantity demanded, the demand is inelastic. This is typical for essential goods with few substitutes, like basic necessities.

The calculation for price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. A value greater than 1 indicates elastic demand, a value less than 1 indicates inelastic demand, and a value exactly equal to 1 indicates unit elasticity. Businesses use this concept to make pricing decisions, as understanding elasticity helps them predict the impact of price changes on their revenue and sales volume. For example, a firm with a product with elastic demand might be hesitant to raise prices, fearing a significant drop in sales, while a firm with inelastic demand might find price increases more profitable.