Elastic and Inelastic Price
Price elasticity is the degree of sensitivity of quantity of a commodity or a service that consumers demand, to a unit change in the price level of the commodity or service. Elasticity could be elastic or inelastic. An elastic commodity is the one that a unit reduction in its price level leads to a massive change in the quantity demanded. On the other hand, an inelastic commodity is the one, whose demand does not respond to changes in its price level. As we shall see in the analysis below, a shift in the supply curve to the right has a greater effect for an elastic commodity than an inelastic commodity (Mankiw, 2011). Elastic Commodity An elasticcommodity is one whose demand is highly responsive to a small change in the price level of the commodity.
Diagrammatically, we can illustrate an elastic commodity or service in the following manner. In an event, when the supply curve shifts to the right hand side, the change in the equilibrium quantity and price level will be as in the following diagram (McEachern, 2011).Inelastic Commodity An inelastic commodity is the one, whose level of quantity that consumers demand, does not respond massively to a change in the price level. It usually has a steeply sloping demand curve compared to an elastic commodity. When the supply of such a commodity shifts to the right hand side, we can demonstrate the changes in the new price level and equilibrium quantity as in the following diagram.
Comparison We can, therefore, ascertain from the above diagram that a unit change in the price level causes a smaller change in the quantity that consumers demand an inelastic commodity than for an elastic commodity (Mankiw, 2011).Conclusion In summary, we can ascertain that the effect of a price change on the quantity that consumers demand is greater for the case of an elastic price than for an inelastic price.