DEFINITION of 'Inelastic'

An economic term used to describe the situation in which the supply and demand for a good or service are unaffected when the price of that good or service changes. Inelastic means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.


Economics textbooks define “inelastic” as meaning that a 1% change in the price of a good or service has less than a 1% change on the quantity demanded or supplied. For example, if the price of an essential medication changed from $200 to $202 (a 1% increase) and demand changed from 1,000 units to 995 units (a less than 1% decrease), the medication would be considered an inelastic good. If the price increase had no impact whatsoever on the quantity demanded, the medication would be considered perfectly inelastic. Economics textbooks depict the demand curve for a perfectly inelastic good as a vertical line, because the quantity demanded is the same at any price. Supply could be perfectly inelastic in the case of a unique good such as a painting. No matter how much consumers are willing to pay for it, there can never be more than one original version of that painting.

By way of contrast, an elastic good or service is one for which a 1% price change causes more than a 1% change in the quantity demanded or supplied. Most goods and services are elastic because they are not unique, but have substitutes. If the price of a plane ticket increases, fewer people will fly and more people will stay home or drive. A good would need to have numerous substitutes to experience perfectly elastic demand.

  1. Supply

    A fundamental economic concept that describes the total amount ...
  2. Advertising Elasticity Of Demand ...

    A measure of a market's sensitivity to increases or decreases ...
  3. Arc Elasticity

    The elasticity of one variable with respect to another between ...
  4. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the ...
  5. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
  6. Income Elasticity Of Demand

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

    Economics Basics

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

    Adam Smith And "The Wealth Of Nations"

    Adam Smith's 1776 classic may have had the largest global impact on economic thought.
  3. Economics

    Introduction To Supply And Demand

    Find out all about supply and demand and how it relates to your daily purchases.
  4. Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  5. Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  6. Fundamental Analysis

    What Is Elasticity?

    Elasticity measures the relationship between a good and its price based on consumer demand, consumer income, and its available supply. Learn the basics about it here.
  7. Economics

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  8. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  9. 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.
  10. Personal Finance


    This tutorial teaches the basics of one of the most important economic topics. A must for all investors.
  1. Why are economists interested in the consumer surplus?

    Economists are interested in consumer surplus because it measures economic welfare, plays a large part in changing market ... Read Full Answer >>
  2. What are some examples of the law of demand in real markets?

    The law of demand posits a negative relationship between the price of a good and quantity demanded if all other factors are ... Read Full Answer >>
  3. What is the difference between price inelasticity and inelasticity of demand?

    These two measurements are interrelated, and are used in conjunction to understand market production and purchasing. Price ... Read Full Answer >>
  4. What is the difference between inelasticity and elasticity of demand?

    Inelasticity and elasticity of demand are the respective end ranges for the formulaic comparison of price and demand for ... Read Full Answer >>
  5. How do you quantify price elasticity?

    Numerically, price elasticity is represented as a coefficient – a numerical measure of the relative sensitivity of one variable ... Read Full Answer >>
  6. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!