Elasticity (in Economics)

Elasticity is a term of economic theory for the sensitivity of offered or demanded goods at its price. It is distinguished:

• Price elasticity of demand - is expressed as the ratio of percentage changes in volume of required goods to the percentage of price changes
• Price elasticity of supply - is expressed as the ratio of percentage changes in the volume of offered goods to the percentage of price changes

Elasticity in practice: Knowledge of the elasticity of the offered products or services is important in pricing, promotion and advertising campaigns. Customer’s price sensitivity means how customers (consumers) will increase or decrease the amount of purchased goods or services, or how they react to the price change. The elasticity is affected by many factors such as quality, brand, fashion trend, credibility, market mood, etc. In general, products with good brand (luxury products, fashion products, high quality products) have a higher elasticity than those of poor quality.