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Elasticity of Demand
Elasticity of demand is an important variation on the concept of demand. Demand can be classified as elastic, inelastic or unitary.

An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small.
The formula for computing elasticity of demand is:

(Q1 – Q2) / (Q1 + Q2)
(P1 – P2) / (P1 + P2)

Elastic Demand
Elasticity of demand is illustrated in Figure 1. Note that a change in price results in a large change in quantity demanded. An example of products with an elastic demand is consumer durables. These are items that are purchased infrequently, like a washing machine or an automobile, and can be postponed if price rises. For example, automobile rebates have been very successful in increasing automobile sales by reducing price.

Close substitutes for a product affect the elasticity of demand. If another product can easily be substituted for your product, consumers will quickly switch to the other product if the price of your product rises or the price of the other product declines. For example, beef, pork and poultry are all meat products. The declining price of poultry in recent years has caused the consumption of poultry to increase, at the expense of beef and pork. So products with close substitutes tend to have elastic demand.

Inelastic Demand
Inelastic demand is shown in Figure 2. Note that a change in price results in only a small change in quantity demanded. In other words, the quantity demanded is not very responsive to changes in price.

Unitary Elasticity
If the elasticity coefficient is equal to one, demand is unitarily elastic as shown in Figure 3. For example, a 10% quantity change divided by a 10% price change is one. This means that a 1% change in quantity occurs for every 1% change in price.

Elasticity of Demand
The elasticity of demand, or demand elasticity, measures how demand responds to a change in price or income. It is commonly referred to as price elasticity of demand because the price of a good or service is the most common economic factor used to measure it.

An elastic good is defined as one where a change in price leads to a significant shift in demand and where substitutes are available for an item, the more elastic the good will be.

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

If the quotient is greater than or equal to one, the demand is considered to be elastic. If the value is less than one, demand is considered inelastic.

Arc Price Elasticity of Demand formula
Arc Price Elasticity of Demand formula.
Investopedia

Common examples of products with high elasticity are luxury items and consumer discretionary items, such as a brand of cereal or candy bars. Food products are easily substituted and brand names are easily replaced by lower-priced items.

A change in the price of a luxury car can cause a change in the quantity demanded, and the extent of the price change will determine whether or not the demand for the good changes and if so, by how much.

Other factors influence the demand elasticity of goods and services such as income level and available substitutes. During a period of job loss, people may save their money rather than upgrading their smartphones or buying designer purses, leading to a significant change in the consumption of luxury goods.

Available substitutes for a good or service makes an item more sensitive to price changes. If the price of Android phones increases by 10%, this could move demand from Android to iPhones.
Inelasticity of Demand
Inelasticity of demand is evident when demand for a good or service is static when its price or other

Inelastic products are usually necessities without acceptable substitutes. The most common goods with inelastic demand are utilities, prescription drugs, and tobacco products. Businesses offering such products maintain greater flexibility with prices because demand remains constant even if prices increase or decrease.

The most common goods with inelastic demand are utilities, prescription drugs, and tobacco products. In general, necessities and medical treatments tend to be inelastic, while luxury goods tend to be most elastic.
Cross Elasticity of Demand

Advertising Elasticity of Demand
The advertising elasticity of demand (AED) is a measure of a market's sensitivity to increases or decreases in advertising saturation. The elasticity of an advertising campaign is measured by its ability to generate new sales.

What Are the 4 Types of Elasticity?
The four main types of elasticity of demand are price elasticity of demand, cross elasticity of demand, income elasticity of demand, and advertising elasticity of demand. They are based on price changes of the product, price changes of a related good, income changes, and changes in promotional expenses, respectively.