Inelastic demand
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Products with a price elasticity of demand of less than 1 are said to have a relatively inelastic demand with respect to price they are said to be price inelastic. Simpler said an inelastic demand is when demand does not respond to price changes. Inelastic demand occurs when there are no alternative products: consumer have nowhere to go....
With a price inelastic demand:
- an increase in price causes
- a reduction in quantity demanded
- but total revenue increases
- a fall in price causes
- an increase in quantity demanded
- but total revenue earned declines
