Define elastic demand

Answer 1

Elasticity is the percentage change in one variable resulting from a percentage change in another variable. Thus, the price elasticity of demand is the percentage change in quantity demanded of a good resulting from a percent change in its price. Elastic demand means that the percentage change in quantity demanded of the good is greater than the percentage increase in price. This means that the demand for a good is very sensitive relative to price. Therefore, if the price increases by one dollar the quantity demanded for that good will decrease by a lot and if the price decreases by one dollar the quantity demanded for that good will increase by a lot. The determinants of price elasticity of demand are: substitutes of the good, percentage of income the good's price, and the need of the good. Substitutes are other goods that have the same or similar function to the particular good; if there are many substitutes then the price will be elastic in which the primary good becomes too expensive consumers will switch their demand to a close substitute, and if there are not many substitutes the price will be inelastic in which the primary good becomes very expensive consumers will have to buy that good no matter what. If the price of the good is a large percent of the consumer's income the elasticity of demand will be high, since the consumer will not want to spend the majority of their income on one good. If the good is a necessity, for example food, then people will have to buy it no matter the price therefore it will be very inelastic. If the good is a luxury good like a yacht then the demand elasticity will be very elastic.

Answer 2

The demand for a certain good is elastic if the percent change in the demand of the good is larger than the percent change in the price of the good. This means that if there is a price increase in a good, the demand for the good will decrease by an equal or greater percentage than the percent change in price. A good tends to be elastic when the purchase of the good can be delayed (not urgent), and when there are other goods that can act as substitutes. Soda is a perfect example of a good having elastic demand: if the price of a certain soda increases, the consumer can easily purchase a different and cheaper soda or not purchase soda at all, resulting in a large decrease in demand. An example of an inelastic good would be medication for a condition; one can not put off buying medication for health reasons and there are likely few substitutes that one can choose, resulting in a relatively small change in demand or no change at all.

Answer 3

Elastic demand is when there is a small increase in Quantity Price and a large decrease in Quantity Demanded.