what is inelasticity?
In economics, ineslasticity is the opposite of elasticity.
This article may help you:
http://en.wikipedia.org/wiki/Elasticity_(economics)
You may find this deinition of inelasticity to be helpful.
A characteristic that describes the interdependence of the supply, demand and price of a commodity. A commodity is inelastic when a price change does not create an increase or decrease in consumption; inelasticity exists when supply and demand are relatively unresponsive to changes in price.
www.nfa.futures.org/basicnet/glossary.aspx
Inelasticity refers to the degree to which the quantity demanded or supplied of a good or service changes in response to a change in its price. Specifically, it measures the responsiveness of demand or supply to changes in price.
To understand inelasticity, it is important to grasp the concept of elasticity. Elasticity is a measure of how sensitive the quantity demanded or supplied is to changes in price or other factors. The elasticity coefficient can be positive or negative and can have different magnitudes. If the coefficient is greater than one, it indicates elasticity, meaning that the quantity demanded or supplied is sensitive to changes in price. On the other hand, if the coefficient is less than one, it indicates inelasticity, implying that there is less responsiveness to price changes.
In an inelastic market, a change in price results in a proportionately smaller change in the quantity demanded or supplied. This suggests that the demand or supply is less sensitive to price fluctuations. In other words, even if the price of an inelastic good or service increases or decreases, the quantity demanded or supplied changes in a relatively smaller proportion.
Determining the degree of inelasticity involves calculating the price elasticity of demand or supply. Price elasticity of demand is computed by dividing the percentage change in quantity demanded by the percentage change in price. If the resulting coefficient is less than 1, it indicates inelastic demand.
For example, if the price of gasoline increases by 10%, and the quantity demanded decreases by only 2%, the price elasticity of demand would be -0.2 (2% divided by 10%). As this value is less than 1, it implies that the demand for gasoline is inelastic, meaning consumers are not significantly responsive to price changes.
Understanding inelasticity is crucial in economics as it helps businesses and policymakers make informed decisions regarding the pricing and availability of goods and services.