Elasticity is a concept used to measure the sensitivity of one variable to change in another variable. Typically used to gauge consumer demand for a good or service, elasticity can be measured by the change in aggregate quantity demanded following a change in price or quality.
Examples of goods that are highly inelastic are water or medicine. Consumer demand for these items will not change drastically in response to a change in price, as these goods are vital to individual health. Inelastic goods include items like toys, where consumer demand for these items will not remain high in response to a spike in price.
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
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