Search Investopedia

Price Elasticity Of Demand

Filed Under »
Dictionary Says

Definition of 'Price Elasticity Of Demand'

A measure of the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as:

Price Elasticity Of Demand
Investopedia Says

Investopedia explains 'Price Elasticity Of Demand'

If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). The opposite also applies, a product is inelastic if a large change in price is accompanied by a small amount of change in demand.

Related Definitions

  •

    Sliding Scale Fees

    A type of tax or cost that may change according to an associated factor. A sliding scale is designed to capture value according to the movement of an underlying variable - most commonly ...
    Read More »

  • Pricing Power

    An economic term referring to the effect that a change in a firm's product price has on the quantity demanded of that product. Pricing power ties in with the "Price Elasticity of Demand."
    Read More »

  • Inelastic

    An economic term used to describe the situation in which the supply and demand for a good are unaffected when the price of that good or service changes.
    Read More »

    • Income Elasticity Of Demand

      A measure of the relationship between a change in income and a change in quantity of a good demanded:
      Read More »

    • 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 ...
      Read More »

    • Total Revenue Test

      A test that approximates the price elasticity of demand by comparing the change in total revenue as a result of changing the product price. The total revenue test assumes all other ...
      Read More »

    • Tax Incidence

      An economic term for the division of a tax burden between buyers and sellers. Tax incidence is related to the price elasticity of supply and demand. When supply is more elastic than ...
      Read More »

    • Quantity Demanded

      A term used in economics to describe the total amount of goods or services that are demanded at any given point in time. The quantity demanded depends on the price of a good or service ...
      Read More »

    • Cross Elasticity Of Demand

      An economic concept that measures the responsiveness in the quantity demand of one good when a change in price takes place in another good. The measure is calculated by taking the ...
      Read More »

    • Demand Elasticity

      In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. Demand elasticity is important because it helps firms model ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions