Question

How would you define the concepts of elastic and inelastic markets? Is the market for Tesla cars elastic or inelastic? Why?

Answer 1

Elastic Market: It is type of market in which price-demand curve is quite steep, i.e. the short change in price can also lead to big changes as the volatility is high. It is generallly seen for the market of luxirious goods like cars.

Inelastic market, in contrast to elastic market is less volatile and less prone to the changes in the demand with the change in the price or the income level. Foe ex, insulin is something which people will need even if its price increases or drops.

Tesla falls under elastic market because of its luxirious characteristic and the change it brings in demand with change in the price.