Business

Difference Between Elastic Demand and Inelastic Demand

Main difference

People often get both terms; elastic demand and inelastic demand intermingle, when asked to differentiate between them. The only reason it puzzles people is the close association of the two terms. Marketing and economics students are familiar with both terms as they are related to the demand for commodities due to variations in different factors. Elastic demand refers to the (negative) change in the quantity demanded by customers or consumers due to the change in the price of that specific product. On the other hand, inelastic demand refers to the commodity, whose quantity demanded does not change even due to the increase in the price of that given commodity.

Comparison chart

Base elastic demand inflexible demand
Definition Elastic demand refers to the (negative) change in the quantity demanded by customers or consumers due to the change in the price of that specific product. Inelastic demand refers to the demand for a good or service that neither increases nor decreases due to the change in price.
Quantity The quantity demanded by consumers decreases for products with elastic demand when prices rise. Remains the same
Products Commodities that have elastic demand are associated with the luxury and conveniences of consumer life. Commodities that have inelastic demand are the necessities of an individual’s life.

What is Elastic Demand?

The elastic demand of the product refers to those goods that witness the decrease in the quantity demanded by the consumer or the customer due to the variation in price. There may be various reasons for the change in price. Mainly, it can be the change in the prices of the commodities that are used to create that product, production problems, taxes, or the change in the economic atmosphere for that product. The price of the product directly depends on the factors mentioned above. Goods or products that have an elastic demand belong mainly to the list of luxury or comfort items for customers. A person can then omit, substitute, or stop using those products. If that product is of any importance to the consumer, you should take that product in less quantity. In the midst of all this it is worth mentioning that the use of basic products from one person to another can vary, which means that the luxury product for one may be a necessity for another or vice versa. For example, makeup is a luxury item for many women, if the price goes up; the consumer will use that product less or switch to the brand that offers lower rates.

What is inelastic demand?

The inelastic demand of the product refers to those goods that do not experience any effect on the quantity demanded by the consumer or the client due to the rise or increase in prices. Basic need products have inelastic demand, since one cannot shorten one’s needs for that product in all directions. The change in the price of that product never affects the demand among the people, since people cannot commit to its use. Water, legumes, salt, meat and vegetables are some of the examples of inelastic demand. People cannot live or get by without these products, even when their prices remain high. The government regulates such products itself and makes sure that prices are kept so low that they are affordable for everyone living in the country.

Key differences

  1. Elastic demand refers to the (negative) change in the quantity demanded by customers or consumers due to the change in the price of that specific product. On the other hand, inelastic demand refers to the demand for a good or service that neither increases nor decreases due to the change in price.
  2. The quantity demanded by consumers decreases for products with elastic demand when prices rise, while it has no effect on products with inelastic demand.
  3. Products that have elastic demand are associated with the luxury and conveniences of a consumer’s life, while products that have inelastic demand are the necessities of an individual’s life.

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