People often get both the terms; elastic demand and inelastic demand intermix, when they are asked to differentiate between them. The only reason bewildering people is the close association of both these terms. Marketing and Economics learners are well familiar with both the terms as they are related to the demand for commodities due to variations in different factors. The elastic demand refers to the (negative) change in the quantity demanded by the customers or consumers due to the change in the price of that specific commodity. On the other hand, the inelastic demand refers to the commodity, whose quantity demanded doesn’t change even due to the rise in the price of that certain commodity. It will be pertinent to mention here that elastic demand is for the commodities that are related to the comfort or luxury of the consumer, whereas the inelastic demand is for the commodities which are necessities of life and have no substitute available.
What is Elastic Demand?
The elastic demand of the product refers to those commodities which witness the decline in the quantity demanded by the consumer or the customer due to the change in the price. There can be multiple reasons for the change in the price. Most primarily, it can be the change in the prices of the basic commodities that are used to create that product, the production issues, taxes or the change in economic atmosphere for that product. The price of the product directly depends on the factors mentioned above. The commodities or products which have elastic demand mainly belong to the list of luxury or comfort items for the customers. Following it an individual can skip, substitute, or leave using such products. If that product is of some importance to the consumer, he/she shall take that product in lesser quantity. Amid all this, it should be kept mentioned that the usage of commodities from people to people might vary, means the luxury product for the one might be a necessity for the other or the vice-versa. For instance, makeup is a luxury item for many of the females, if the price goes up; the consumer will use that product in lesser quantity or will skip to the brand offering lesser rates.
What is Inelastic Demand?
The inelastic demand of the product refers to those commodities which witness no effect in quantity demanded by the consumer or the customer due to the hike or increase in the prices. Basic necessity products have the inelastic demand as one can’t cut short his/her needs for that commodity in every thick and thin. The change in the price of that commodity never affects the demand among the people as people can’t compromise on its usage. Water, Pulses, Salt, Meat, and Vegetables are few of the examples of the inelastic demand. People can’t live or manage without these products, even when their prices are kept high. The government regulates such products themselves and make sure the prices are kept such low that they are accessible for all the people living in the country. The addicted item like cigarette and liquor also witness the inelastic demand. This can be further elaborated with the example that the addicted cigarette smoker keeps on smoking even when the government imposes the strict taxes on it, and the prices went up to the sky high.
- The elastic demand refers to the (negative) change in the quantity demanded by the customers or consumers due to the change in the price of that specific commodity. On the other hand, the inelastic demand refers to the demand for a good or service that does not increase or decrease due to the change in the price.
- The quantity demanded by the consumers get decreased in the case of elastic demand products when prices get higher, whereas it has no effect on the inelastic demand products.
- The commodities having elastic demand are associated with the luxury and comforts of consumer’s lives, while the commodities having inelastic demand are the necessities of an individual’s life.