Elasticity vs. Inelasticity of Demand

Elasticity and inelasticity of demand refer to the responsiveness of quantity demanded to changes in price. Elastic demand occurs when a small change in price leads to a proportionally larger change in quantity demanded, indicating high price sensitivity. Inelastic demand, on the other hand, describes situations where changes in price have a relatively small effect on quantity demanded, suggesting low price sensitivity. Understanding demand elasticity is crucial for pricing strategies and revenue management.