What does it mean for demand to be elastic?
In economics, the elasticity of demand is a measure of how sensitive consumers are to changes in prices.
A good that has an inelastic demand will not experience a large change in quantity demanded when its price changes.
Conversely, if the good has an elastic demand then consumers will react more strongly and decrease their purchases as prices rise.
During this time, firms might also invest in new capacity but they have no way to respond quickly enough with supply adjustments.
So long as there are spare resources available on the market.
In the short-run, a firm’s demand curve is relatively inelastic because there are not many available resources to increase production.
The elasticity of demand decreases as firms invest more heavily in capital and can respond with more rapid changes to fluctuations in supply.
When consumers are sensitive to price changes such that they will buy less if prices go up .
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