What is the difference between elastic and inelastic demand?
An example of an AI chatbot conversation about the difference between elastic and inelastic demand.
Can you explain the difference between elastic and inelastic demand?
Sure! Elastic demand refers to a situation where the quantity demanded changes significantly with a price change, while inelastic demand means that quantity demanded changes little with price changes.
Can you give me examples of each?
Of course! An example of elastic demand is luxury goods, like designer handbags. Inelastic demand can be seen in essential goods, like insulin for diabetics.
How do these concepts affect pricing strategies?
Understanding elasticity helps businesses set prices. For elastic products, lowering prices can increase sales, while for inelastic products, they can raise prices without losing many customers.
What factors influence whether a product is elastic or inelastic?
Factors include the availability of substitutes, necessity versus luxury status, and the proportion of income spent on the good.
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