Elasticity measures how much one thing changes when another thing changes. In economics, it usually refers to how quantity demanded or supplied responds to price. If a small price increase causes a big drop in sales, demand is elastic. If sales barely move, demand is inelastic.

Some goods are famously inelastic. Insulin, gasoline, and salt have few substitutes and are necessities, so people keep buying even when prices rise. Luxury goods, restaurant meals, and brand-name products tend to be more elastic. Consumers can switch, wait, or go without.

Elasticity matters for pricing. A company selling an elastic product cannot raise prices without losing customers. A government taxing an inelastic good, like cigarettes, can raise revenue because people keep buying. The same logic applies to supply: how quickly producers can respond to price changes depends on how flexible their operations are.

Types of elasticity

• Price elasticity of demand
• Price elasticity of supply
• Income elasticity of demand
• Cross-price elasticity
• Elastic vs. inelastic ranges