ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If demand is elastic, the quantity demanded is very sensitive to price, e.g. when a 1% rise in price generates a 10% decrease in quantity. If demand is inelastic, the good’s demand is relatively insensitive to price, with quantity changing less than price.

Detailed explanation-2: -If the quantity demanded of a product changes greatly in response to changes in its price, it is elastic. That is, the demand point for the product is stretched far from its prior point. If the quantity purchased shows a small change after a change in its price, it is inelastic.

Detailed explanation-3: -Typically, the concept of price elasticity of demand is used to measure price sensitivity. Price elasticity describes the responsiveness of demand changes in price levels. A product is price elastic if even minor fluctuations in price are associated with changes in demand.

Detailed explanation-4: -Price sensitivity is also called the elasticity of demand, which measures a change in the demand of products as a reaction to a change in the price of the product. Changes in the cost of producing a good cause a change in the price of the product, which in turn, affects consumers’ purchasing behaviors.

Detailed explanation-5: -Definition: Demand sensitivity is also known as price elasticity of demand and should not be confused with price elasticity of supply. It shows the responsiveness of the demand for a product to a change in its price.