Quote (Azrad @ 3 Apr 2013 14:02)
I'm not very good with economics, but as I understand it, elastic goods are goods that the price affects the demand (price goes too high, people won't buy it). Inelastic means the price does not effect the demand (like gasoline, if the price is $1 a gallon or $4, I have to buy 8 gallons to get to work and back this week).
I'd say it is elastic because as p increases, x will decrease. If it was inelastic, it wouldn't depend on price.
This is partly true. The more inelastic a good is, the lower the percentage change in demand is compared to a percentage chance in price. For example raising the price of oil by 50% would reduce the demand by a bit (lets say 15%), but by a low amount. Same goes for other inelastic goods like medical supplies etc.
So elasticity is the percentage change in demand divided by the percentage chang e in price. E = (delta X / x) / (delta P / p)
delta X is the derivative of x.
If you calculate this youll see that doubling price will always result in the demand being reduced to 1/4th of its original value (100% increase in price, 75% decrease in demand). This means that the good is slightly inelastic.