Elastic Demand

Elastic demand refers to a situation where a small change in price causes a relatively larger change in the quantity of a product or service that consumers buy. For example, if the price of a luxury item drops slightly, people might buy much more of it. Conversely, if the price increases slightly, they might buy much less. This happens when there are many alternatives or the item isn't essential. In essence, elastic demand indicates that consumers are sensitive to price changes, and businesses need to consider this when setting prices to avoid losing customers.