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Elasticity of demand

   Also found in: Wikipedia, Hutchinson 0.04 sec.
Elasticity of demand
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods, where a rise in price causes a decrease in demand. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food, where a rise in price has little or no effect on the quantity demanded by buyers.


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Looking first at a ppm, equating MR and MC (second-order conditions are ignored) implies the firm sets a price that is a multiple of the MC of its optimal output; more specifically, the firm's optimal price is equal to the MC of its optimal output multiplied by an expression equal to: the absolute value of the price elasticity of demand at its optimal output divided by that absolute value minus 1.
Product and resource markets: points of symmetry by Weber, David W. / Academic Exchange Quarterly
Drugstores are selling needed staples, however, so they're less subject to the fickle whims of retail, unlike fashion and gift retailers that have a high elasticity of demand.
WALGREENS DRUGSTORES SPREADING IN SOUTHLAND by Daily News (Los Angeles, CA)
The 'AA-' rating reflects the economic strength and near monopoly position of the seven bridge system which provides critical transportation links in the San Francisco Bay Area, a mature and relatively stable traffic base, improved legal ratemaking flexibility, and demonstrated low to moderate elasticity of demand.
Fitch Rates Bay Area Toll Auth $1.16B 2006 Series F Revs 'AA-'; ... by Business Wire
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