Side by Side
The table below covers every dimension an exam question is likely to test. Read it once, then return to it when a specific number or concept needs pinning down.
| Dimension | Elastic demand | Inelastic demand |
|---|---|---|
| Elasticity value | ||
| What buyers do | Quantity moves by a bigger percentage than price | Quantity moves by a smaller percentage than price |
| Sensitivity to price | Very responsive — a small price rise sends many buyers away | Barely responsive — buyers keep purchasing even as price rises |
| Raise the price → total revenue | Falls — volume lost outweighs the higher price per unit | Rises — volume lost is small relative to the higher price per unit |
| Cut the price → total revenue | Rises — volume gained outweighs the lower price per unit | Falls — volume gained is small relative to the lower price per unit |
| Demand curve near a point | Flatter (more horizontal) | Steeper (more vertical) |
| Typical goods | Branded soda, restaurant burgers, airline seats | Gasoline, insulin, salt, electricity |
| Why | Close substitutes available; luxury or discretionary purchase; large share of budget; buyers have time to adjust | Few or no substitutes; necessity; small share of budget; short time horizon to adjust |
The deepest distinction: percentages, not raw amounts
Price elasticity of demand — defined as the percentage change in quantity demanded divided by the percentage change in price — is built entirely around percentages, not the raw size of the change. A 2 item is a 50% change; the same 100 item is 1%. Elasticity tells you whether buyers' quantity reaction outruns that percentage change in price (elastic, ) or lags behind it (inelastic, ).
This percentage logic is exactly why the revenue effects run in opposite directions. When demand is elastic, the quantity reaction is proportionally larger than the price change, so the revenue lost from fewer units sold exceeds the revenue gained from the higher price — total revenue falls. When demand is inelastic, the quantity reaction is proportionally smaller, so the revenue gained from the higher price exceeds what is lost from the modest drop in volume — total revenue rises. The unit-elastic case () sits at the exact crossover point where the two forces cancel out and revenue stays unchanged.