The concept of elasticity is one of the most importance aspects of demand analysis.
In general terms, elasticity of demand measures the magnitude of the responsiveness or sensitivity of the quantity demanded of a commodity to a change in some demand determinant.
A commodity which has several uses will have an elastic demand, On the other hand, a commodity having only one use will have inelastic demand.
The more inelastic the demand, the more accurate the forecasts. The demand for necessities can be forecast with a higher degree of accuracy compared with non-necessities and demand for non-durable goods with a higher degree of accuracy than for durables.
Related to the elasticity of demand is the influence of business cycles. Such cycles impact least on inelastic demand and most on elastic demand.
People must eat and acquire necessities which are given priority over other purchases in case of income reductions, as during recessions.
The demand of necessities is inelastic and those of comforts and luxuries of life are elastic.
This is so because certain goods which are essential for life will be demanded at any price, whereas goods meant for luxuries and comforts can be dispensed with easily, if these good appears to be costly.
What is the elasticity of demand?
