A01 chaf6542 06 se fm indd

price elasticity of demand

. This 

is a measure of consumer behaviour based on economic theory that indicates the change in 

demand for a product or service in response to changes in price. Price elasticity of demand 

is determined by the price of the product, availability of alternative goods from alternative 

suppliers (which tends to increase online) and consumer income. A product is said to be 

‘elastic’ (or responsive to price changes) if a small change in price increases or reduces the 

demand substantially. A product is ‘inelastic’ if a large change in price is accompanied by a 

small amount of change in demand. More details on price elasticity of demand are given in 

Box 8.4.