Now, the concept of ‘Elasticity’. Its all about how responsive consumers are to changes in the prices of the goods and services they buy every day.
- If the price goes up, and you (as a consumer) want it MUCH less than before, then you are reacting very strongly to a change in its price. The good is said to be price ‘elastic.’
- Similarly if you react very little or not at all (and carry on buying the same amount), then the good is price ‘inelastic.’
Heres the PDF PIIGSTY Econ 101 #10 Elasticity
Heres what all the theory looks like in diagrams…