Priceelastic

Priceelastic refers to the concept of price elasticity in economics, often used to describe how sensitive a good or service is to changes in its price. The most common form is price elasticity of demand, which measures how much the quantity demanded responds to price changes, though price elasticity of supply is also discussed. The term captures the degree of responsiveness in market behavior to price movements.

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. At a point, Ed = (dQ/dP) × (P/Q). Because demand typically falls as price rises, Ed is usually negative; economists often report its absolute value for ease of comparison. When the absolute value is greater than one, demand is considered elastic; when less than one, inelastic; and when equal to one, unit elastic. Elasticity helps explain how revenue responds to price changes: with elastic demand, price cuts can increase total revenue, while with inelastic demand, price increases may raise revenue.

Determinants of price elasticity include the availability of substitutes, the share of a consumer’s budget, whether the good is a necessity or luxury, and the time horizon over which consumers can adjust. Elasticity often differs across markets and definitions; longer time frames and broader market definitions tend to yield higher elasticity.

In addition to price elasticity of demand, price elasticity of supply measures how responsive producers are to price changes, influenced by production capacity and flexibility. Elasticity estimates are subject to data quality and measurement choices and are most informative as comparative, not absolute, indicators across contexts.