Business Definition for: inelastic demand
inelastic demand
desire for a product or service that does not vary with increases or decreases in price. Products that are daily necessities, and for which there are few alternatives, tend to exhibit inelastic demand. For example, the demand for bar soap, salt, and milk is relatively inelastic. In contrast, demand for vacation travel, premium ice cream, and entertainment tends to be elastic.
See also
price sensitive
,
elasticity
Related Terms:
tendency of the demand for a product or service to vary according to variations in price. Some goods are more price sensitive than others, depending upon other factors that impact demand, such as need for the products (medicine vs. cosmetics), the availability of substitutes (salt vs. bread), and the relative size of the variation in price. Marketers of price-sensitive goods should test new prices before implementing them, to evaluate the impact on demand.
degree to which supply or demand for a product or service will change as a result of a change in price. A price elasticity of 1.0, as demonstrated by actual sales history, means that demand (or sales) rises or falls in exact proportion to a decrease or increase in price. For example, if the price goes up 10%, sales go down 10%. Nonluxury items or services, such as emergency surgery in the extreme, have very little elasticity, because people will buy or pay for them regardless of cost.
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