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. Total Revenue Test

    A test that approximates the price elasticity of demand by comparing ...
  4. Demand

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

    A fundamental economic concept that describes the total amount ...
  6. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
Related Articles
  1. Economics Basics
    Economics

    Economics Basics

  2. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

  3. Why We Splurge When Times Are Good
    Personal Finance

    Why We Splurge When Times Are Good

  4. What's the difference between macroeconomics ...
    Investing

    What's the difference between macroeconomics ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center