What is inelastic demand?

There are many types of demands, and its graphic representation determines whether or not there is a relationship with the changes that occur or the type of good in question. Today we are going to talk about a specific type of demand.

The inelastic demand is the one that does not change when the price changes. That is, if we vary the price of the demand for a certain good or service, your demand will not receive major changes (it will vary less than proportional).

Inelastic demand formula

To know if this happens or not, if we change the price of a good by 20% and, on the contrary, its demand is reduced by less than 20%, we are facing a demand of this type. The elasticity of said demand is known as the price elasticity of demand, and whose calculation is:Inelastic demand formula

Where we have:

Qd = Quantity demanded of a certain good

P = Price of the good

As we can see, these are percentage measures, which allows comparison and obtain a value that does not depend on other values ​​in order to be compared. If the result in this formula is less than 1, we are facing an inelastic demand; if she is older, the demand is elastic.

In order to check whether or not a certain good has inelastic demand, there are certain factors that determine it. Factors that can make demand inelastic are:

  • The null or little existence of substitutes for a certain good, which implies that the elasticity of demand is lower
  • When a good is considered essential, it will have an inelastic demand (a classic example is insulin)
  • Demand will be inelastic when we are talking about the short term, although this is not always the case

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