How does inflation affect price elasticity of demand?

How does inflation affect price elasticity of demand?

Inflation can impact price elasticity by altering consumer purchasing power. When prices rise, consumers may buy less of certain goods, affecting their elasticity.

Can you explain what price elasticity of demand means?

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. A high elasticity means consumers are sensitive to price changes.

What are some examples of goods with high and low price elasticity?

Goods like luxury items often have high elasticity, while necessities like bread or medicine tend to have low elasticity, as consumers will buy them regardless of price changes.

How does inflation specifically change consumer behavior?

Inflation can lead consumers to prioritize essential goods over luxury items, reduce overall spending, and seek substitutes for more expensive products.