What is it called if the price of a product goes up and people buy less of it?When the amount of a good or service consumers are willing to buy drops a greater percent than the price increases, the...
When the amount of a good or service consumers are willing to buy drops a greater percent than the price increases, the product is said to have what?
As stated in Post # 2, it is called "Price Elasticity of Demand" when consumers purchase less of a product if the price increases. The price elasticity of demand, using a mathematical formula, gives an exact calculation of the effect of a change in price on the quantity that consumers demand.
Economists use this calculation to understand how consumers will react to price increases. This helps them formulate conclusions on how the economy in a nation, or region of a nation, will handle price fluctuations, based on consumer behavior. They measure the sensitivity of demand as relates to consumers' attitudes to increased prices and the actions they take (buying or not buying) because of price changes.
If this change happens, we say that the product has elastic demand. Price elasticity of demand is a measure of how much the quantity demanded changes in response to a change in price. If you want to think of it in graphic terms, it is a measure of how steep the slope of the demand curve is. The more the quantity demanded changes in response to a change in price, the more elastic the demand for the product is. So, in this case, the answer is that this product is said to have elastic demand.