BNET Business Dictionary
Business Definition for: Elasticity
- the measure of the sensitivity of one variable to another.
Example: In practical terms, elasticity indicates the degree to which consumers respond to changes in price. It is obviously important for companies to consider such relationships when contemplating changes in price, demand, and supply.
Demand elasticity measures how much the quantity demanded by a customer changes when the price of a product or service is increased or lowered. This measurement helps companies to find out whether demand will remain constant despite price changes. Supply elasticity measures the impact on supply when a price is changed.
The general formula for elasticity isElasticity = % change in x / % change in yIn theory, x and y can be any variable. However, the most common application measures price and demand. If the price of a product is increased from $20 to $25, or 25%, and demand in turn falls from 6,000 to 3,000, elasticity would be calculated asâ€" 50% / 25% = â€" 2A value greater than 1 means that demand is strongly sensitive to price, while a value of less than 1 means that demand is not price-sensitive.
Wiktionary Definition for: Elasticity
- physics The property by virtue of which a material deformed under the load can regain its original dimensions when unloaded
- economics The sensitivity of changes in a quantity with respect to changes in another quantity.
- the quality of being elastic
- adaptability
Additional Resources
- The Brand Switching Fraction Of Promotion Effects: Unit Sales Versus Elasticity Decompositions
- This paper explores the reason for the research literature that focuses on elasticities, it derive analytical expressions that relate the decomposition of unit sales effects to the elasticity decomposition. This paper apply these expressions to obtain estimated unit sales effect decompositions from previously reported elasticity decomposition results. It shows why...
- White papers 2001-08-29
- Price Elasticity of Demand for Term Life Insurance and Adverse Selection
- This paper provides an empirical estimate of "price" and "risk" elasticity's of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that...
- White papers 2003-08-01
- Measuring The Effect Of Globalization On Labour Demand Elasticity: An Empirical Application To OECD Countries
- There are various paths through which globalization are channelled to the labour market. One of these is the effect on labour demand elasticity. Trade might induce an increase in this elasticity via a scale effect due to the increased competition on the output market and/or via a substitution effect generated...
- White papers 2003-11-01
- Tax Bases, Tax Rates and the Elasticity of Reported Income
- Tax reforms usually change both tax rates and tax bases. Using a panel of income tax returns spanning the two major U.S. tax reforms of the 1980s and a number of smaller tax law changes, the paper finds that the elasticity of income reported on personal income tax returns depends...
- White papers 2003-10-01
- Dynamic modulus of elasticity of wrought superalloys.(Brief Article)
- Dynamic modulus of elasticity of wrought superalloys At 21 [degrees] ...
- Research articles 1999-12-01
- Healthcare's Low Elasticity Pays Off
- Zacks.com submits: Elasticity of demand is a concept that resides at the core of economic fundamentals. Simply stated, elasticity of demand measures customer sensitivity to fluctuations in price. If price adjustments lead to a change in purchasing behavior, demand is considered to be elastic. Demand sensitivity is a...
- External links 2008-09-08
- Price Elasticity Smacks Sony, Blu-Ray, Playstation
- Price Elasticity Smacks Sony, Blu-Ray, PlaystationRE: Price Elasticity Smacks Sony, Blu-Ray, PlaystationThe other big issue is that people can't justify the increase in price going from picture quality of regular DVD to Blue Ray, especially in these tough economic times. In parallel, consumers are generally satisfied with compressed MP3...
- Discussion threads 2008-09-25
- Numerical Identification of Elasticity Coefficients for the Bending Problem
- This paper discusses a test for identifying elasticity coefficients for the bending problem. Bending is a problem of flat textiles, and its existence is demonstrated by experimental material based on coordinates of a bent sample. This paper proposes another usage of Peirce's cantilever test for determining the relationship between bending...
- White papers 2004-12-01
- Limited Asset Market Participation and the Elasticity of Intertemporal Substitution
- The paper presents empirical evidence based on the U.S. Consumer Expenditure Survey that accounting for limited asset market participation is important for estimating the elasticity of inter-temporal substitution. Differences in estimates of the EIS between asset holders and non-asset holders are large and statistically significant. This is the case whether...
- White papers 2002-08-16
- Dying to Save Taxes: Evidence From Estate Tax Returns on the Death Elasticity
- This paper examines data from U.S. federal tax returns to shed light on whether the timing of death is responsive to its tax consequences. The paper investigates the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer, or dying sooner, could...
- White papers 2001-03-01
- Gains From Trade And Efficiency Under Monopolistic Competition: A Variable Elasticity Case
- This paper presents a general equilibrium model of monopolistic competition with variable demand elasticities and investigates the impact of free trade on welfare and efficiency. First, contrary to the constant elasticity case, in which all gains from trade are due to increasing product diversity, our model features gains from pro-competitive...
- White papers 2006-02-28
- Measuring Consumer And Competitive Impact With Elasticity Decompositions
- In this paper, the author discusses three methods of decomposing the elasticity of own-good demand. One of the methods, the decision-based decomposition, is useful in determining the influence of changes in consumers' decisions on the growth in own-good demand. The other two methods, the unit-based decomposition and the share-based decomposition,...
- White papers 2006-03-02
- New ExxonMobil Chemical Vistamaxx Grades for Spunbond Processing Deliver Enhanced Elasticity Introduced to China Market
- HOUSTON -- ExxonMobil Chemical today has announced at Chinaplas 2005 the addition of two new grades to its family of VistamaxxTM specialty elastomers, both specifically designed to bring greater elasticity to the spunbond processing of nonwoven fabrics.
- Research articles 2005-06-20
- Price Elasticity Smacks Sony, Blu-Ray, Playstation
- You'd think that if a company got rid of the competing technology, it would be able to gain market share. Not so for Sony. Market share for Blu-Ray discs have actually fallen since HD DVD was taken off the market. Grabbing market share is regular DVDs, according to Nielsen VideoScan....
- Blog posts 2008-09-24
- STRATEGY ANALYTICS: Online Video Sales to Reach $1.5 Billion in 2007; Pent-Up Demand Revealed in Price Elasticity Analysis.
- M2 PRESSWIRE-13 December 2006-Strategy Analytics, Inc.: STRATEGY ANALYTICS: Online Video Sales to Reach $1.5 Billion in 2007; Pent-Up Demand Revealed in Price Elasticity AnalysisC1994-2006 M2 COMMUNICATIONS LTD RDATE:14122006 Boston, MA -- Online sales of TV shows, movies and other prerecorded...
- Research articles 2006-12-13
- Dell Inc. F1Q07 (Qtr ended May 5 2006) Earnings Conference Call Transcript (DELL)
- Question-and-Answer SessionOperator Operator Instructions Your first question comes from Richard Farmer - Merrill Lynch. Richard Farmer - Merrill Lynch Thank you. Jim and Kevin, three questions all on the same topic of elasticity. You mentioned that you have seen a pickup in unit...
- Earnings calls 2006-05-18
- Flexible Decomposition Of Sales Promotion Effects Using Store-Level Scanner Data
- Recent studies in marketing show decompositions of sales promotion effects based on household-level scanner data. Typically, the total elasticity is decomposed into choice, timing, and quantity elastic ties. This article proposes a model that estimates standard, enhanced, and flexible decompositions based on store-level data. The standard decomposition divides the own-brand...
- White papers 2000-12-15
- Macroeconomic Performance And Poverty Reduction
- This paper investigates the link between macroeconomic performance and the change in the poverty rate among 47 episodes of growth and 52 episodes of economic downturn in developing and transition economies. It shows that, on average, i the greater the inequality, the lower the elasticity of poverty to growth, and...
- White papers 2003-04-01
- Why Do Asset Prices Not Follow Random Walks?
- This paper analyzes the effect of non-constant elasticity of the pricing kernel on asset return characteristics. It is shown that declining elasticity of the pricing kernel can lead to predictability of asset returns and high and persistent volatility. Also, declining elasticity helps to explain the use of technical analysis and...
- White papers 2004-01-01
- The Kroger Co. F1Q08 (Qtr End 5/24/08) Earnings Call Transcript
- Question-and-Answer Session Operator Operator Instructions Your first question will be from the line of John Heinbockel of Goldman Sachs. Please proceed. John Heinbockel - Goldman Sachs A couple of things -- how would you break the comp down between traffic and ticket? It looks like traffic is actually...
- Earnings calls 2008-06-24
