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 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. Investing

    What's the difference between macroeconomics and microeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and government decisions. Macroeconomics and microeconomics, and their wide ...
  5. Economics

    What is a roll-up merger and why does it occur?

    Find out what a roll-up merger is and how it is executed. See why roll-ups might bring added efficiency and competition into a fragmented market.
  6. Economics

    What are the differences between internal and external economies of scale?

    Take a deeper look at the differences between internal and external economies of scale, and learn why internal economies offer more competitive advantage.
  7. Economics

    How does marginal cost of production relate to economies of scale?

    See how marginal cost of production relates to economies of scale, and why every company should be concerned with reducing its marginal costs.
  8. Professionals

    How are labor demand forecasts made in human resources planning?

    Discover how human resource planning might be used to estimate the correct demand for labor in a given market, both qualitatively and quantitatively.
  9. Professionals

    How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a shortage or surplus.
  10. Economics

    What is a diseconomy of scale and how does this occur?

    Take a deeper look into diseconomies of scale, the economic phenomenon that can make companies less efficient as they become too large.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center