Question

In a short response

Describe what it means when price changes are elastic

Describe what it means when price changes are inelastic

(U.s gov and economics)

Answer 1

Elastic price changes occur when the percentage change in quantity demanded or supplied is greater than the percentage change in price. This happens when a good or service has many substitutes or is a significant portion of a consumer's budget. Inelastic price changes occur when the percentage change in quantity demanded or supplied is less than the percentage change in price. This occurs when a good or service has few substitutes or represents a small portion of a consumer's budget, or when it is essential or has no close substitutes.