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Economics explained
Category:
Elasticity
Inelastic demand
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Inelastic Demand
If a price change causes a relatively small change in the quantity demanded, then demand is said to be price inelastic that is, buyers are not highly responsive to changes in price.
If the PED for a product is less than 1 demand is price inelastic.
This is because the percentage change in quantity demanded is smaller than the percentage change in the price.
Demand is inelastic between points a and c.
A rise in price from $4 to $8 causes a proportionately smaller fall in quantity demanded: from 20 units to 15 units.
Total expenditure rises from $80 (the blue area) to $120 (the pink area)
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