Demand Elasticity Analysis

Demand elasticity analysis measures how sensitive the quantity demanded of a good or service is to changes in price, income, or other factors. If demand is elastic, a small price change results in a large change in quantity demanded. Conversely, if it’s inelastic, quantity demanded changes little with price fluctuations. This analysis helps businesses and policymakers understand consumer behavior, make pricing decisions, and predict the impact of economic changes. For example, luxury items often have elastic demand, while essential goods like bread typically have inelastic demand.