nearelasticity

Nearelasticity is a term sometimes used in economics to describe a situation where the price elasticity of demand or supply is close to, but not exactly, one. Elasticity measures the responsiveness of quantity demanded or supplied to a change in price. A price elasticity of one, often referred to as unit elasticity, signifies that a percentage change in price leads to an equal percentage change in quantity.

When elasticity is near one, it suggests that changes in price will have a substantial, but not perfectly proportional, impact on the quantity traded. For instance, if the price elasticity of demand is 0.9 or 1.1, it would be considered in the realm of nearelasticity. In such cases, a small increase in price would lead to a slightly smaller or slightly larger decrease in quantity demanded, respectively.

The concept of nearelasticity is more of a descriptive observation than a strict theoretical definition. It is often used to discuss market behaviors where the balance between price changes and quantity responses is delicate. Understanding whether a good or service exhibits nearelasticity can be important for businesses when setting prices and for policymakers assessing the potential effects of taxes or subsidies. It implies that price adjustments will have a noticeable effect on market outcomes, but the exact proportionality of unit elasticity is not met.