Elastic

AAA

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.

INVESTOPEDIA EXPLAINS 'Elastic'

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.

RELATED TERMS
  1. Inelastic

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

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

    An economic principle that describes a consumer's desire and ...
  4. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
  5. Aggregate Supply

    The total supply of goods and services produced within an economy ...
  6. Supply

    A fundamental economic concept that describes the total amount ...
RELATED FAQS
  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 >>
  2. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  3. If a particular good's price elasticity is high, does this mean the supplier should ...

    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 >>
  4. What is price variance in cost accounting?

    Price variance in cost accounting is the difference between the actual price paid by a company to purchase an item and its ... Read Full Answer >>
  5. What do you need to know to create a business model?

    A business model lays out the idea for a business, along with the step-by-step plan for making the business profitable. To ... Read Full Answer >>
  6. Do any markets not exhibit asymmetric information?

    Asymmetric information, when interpreted literally, means that two parties to an economic transaction have different information ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  3. Personal Finance

    Why We Splurge When Times Are Good

    The concept of elasticity of demand is part of every purchase you make. Find out how it works.
  4. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  5. Economics

    Gaining Market Influence-- The Case of US Shale

    A convergence of sustained bank financing, falling production costs and rising oil prices might position the US shale industry for a greater market role.
  6. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  7. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  8. Personal Finance

    Can Electric Cars Replace Gas Guzzlers?

    High costs and poor battery performance have deterred many from switching to electric cars, which begs the question: can electric cars replace gas guzzlers?
  9. Economics

    Explaining Business Risk

    Business risk is the risk associated with the overall operations of a business entity.
  10. Fundamental Analysis

    How to Calculate a Combined Ratio

    Combined ratio is a formula used in the insurance industry to measure the performance of an insurance company.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center