




Demand elasticity, also known as price elasticity of demand, is a concept economists use to measure price sensitivity. In principle, demand elasticity is an economic term defined as the percentage change in quantity demanded, divided by the percentage change in price. Demand elasticity can be expressed graphically through a simplified linear demand curve. On this downward sloping curve demand elasticity can be seen as incremental changes in the quantity demanded (x axis) going in the opposite direction relative to the changes in the price (y axis). Thus, demand elasticity remains a negative value. To simplify the mathematical presentation of demand elasticity, economists drop the negative sign and use only the coefficient. As a result, demand elasticity is expressed as (Ed). Depending upon the responsiveness to price changes, demand elasticity can be elastic or inelastic as described by the angle of the demand curve. The flatter the curve, the more price elastic, while a steeper curve would mean more price inelastic.
Rate this demand elasticity definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: in escrow, whollyowned subsidiary, risk management, phantom income, class C shares, deferred tax, minority interest, 1031 exchange, command economy, stock market close, VIX, 144a, average price per share, cancelled check, deferred revenue, 401a, 1035 exchange, EBITDA, required rate of return, debt service coverage, option premium, current ratio, margin rate, open position, limit order, reverse mortgage, FICO score, Zero Cost Collar, covered put, exdividend, FTSE, real GDP, liquidity ratio, LIBOR, labor relations, balance sheet, implied volatility, Key Rate Duration, irrevocable trust, diluted share, quality assurance, retained earnings, stock split, inflation, APR, exdividend date, dividends payable, annual return, per diem


 