DEFINITION of 'Elastic'

A situation in which the supply and demand for a good or service can vary significantly due to the price. The elasticity of a good or service can vary according to the amount of close substitutes, its relative cost and the amount of time that has elapsed since the price change occurred.


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Companies that operate in very fierce and competitive industries provide goods or services that are very elastic because these companies tend to be price takers. For example, the airline industry is very elastic because all airlines offer a very similar service (getting passengers from point A to point B). For the most part, an airline company can't have prices that are significantly different from those of its competitors because this can result a huge loss of business to competitors.

  1. Supply

    A fundamental economic concept that describes the total amount ...
  2. Inelastic

    An economic term used to describe the situation in which the ...
  3. Oversupply

    An excessive amount of a good or other substance. Oversupply ...
  4. Demand

    An economic principle that describes a consumer's desire and ...
  5. Aggregate Supply

    The total supply of goods and services produced within an economy ...
  6. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
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  1. What factors influence a change in supply elasticity?

    The elasticity of supply measures the percentage change in supply due to a change in another factor. It refers to how the ... Read Full Answer >>
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    In economics, price elasticity is a measure of how reactive the marketplace is to a change in price for a given product. ... Read Full Answer >>
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    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
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