Question

3. What does it mean if a good has inelastic demand? Provide an example of an inelastic good?

Answer 1

Solution

Inelastic Demand: Inelastic demand is that when people purchase the same amount of a good or product, whether the price increases or decreases. Inelastic is an economic concept that refers to the static quantity of products or services when their price changes because consumers buying habits remain static when prices go up and down. In other words, inelastic demand for a good means that a 1 per cent change in the price of a product has less than 1 per cent change in quantity demanded. This situation arises with those products which are essential to human beings.
Such as ‘water or air’ is an example of an inelastic product. However, in real life, there is no example of perfectly inelastic products.