elasticity business definition

The responsiveness of the quantity of an item purchased to changes in the item's price. If the quantity purchased changes proportionately more than the price, the demand is elastic. If the quantity purchased changes proportionately less than the price, the demand is inelastic. For example, price increases by cigarette manufacturers have a relatively small effect on cigarette consumption, thus, the demand for cigarettes is inelastic. Also called price elasticity. Compare inelasticity. See also advertising elasticity, cross elasticity, unitary elasticity.