Quick Definition

Demand elasticity measures how sensitive the quantity demanded of a good or service is to changes in its price.

Formula

Examples

• 1If the price of coffee increases by 10% and the demand decreases by 5%, coffee has an inelastic demand.
• 2A significant drop in the demand for luxury cars following a slight increase in prices indicates high elasticity.
• 3When fuel prices rise, the demand for public transportation often increases, showing cross-elasticity of demand between these goods.

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