A good or service is inelastic when the demand for it is not affected when its prices go up or down. In contrast, an elastic good that has a 10% price increase may also see a 10% drop in demand. This good is said to have a 1:1 ratio in demand and price movements, or an elasticity of 1 or greater. Inelastic goods have an elasticity of less than 1.
If the price of a good or increases, why would a consumer continue buying that good? Why not buy a different good? Unlike elastic goods, inelastic goods do not have substitutes, so consumers have no choice but to buy at a higher price. Inelastic goods consist of medication, cigarettes, electricity, and gasoline.
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