Narrator: Listen to part of a talk in an economics class.

Professor: The term “elasticity” has a different meaning in economics. In economics, we don’t use this term for how far something will stretch, not exactly. We use elasticity to describe how much one variable will change as a response to changing another variable. The ratio of the proportional change of one variable to proportional change of another variable. It’s commonly used in reference to prices. Price elasticity of demand, simply put, represents the relationship between change in demand and change in price. If the price goes down, how many more people will want this product?

Let’s take toilet paper, for instance. Toilet paper is one of those items that people use on a daily basis, and there isn’t a really good substitute, well, not an affordable substitute. And, in addition, it is a product that is a necessity. If you don’t have toilet paper, what do you do? Toilet paper is a basic inelastic good. If the price goes up, the demand will stay about the same. People aren’t going to stop buying toilet paper because it gets more expensive. It is inelastic because as the price changes, the demand will stay about the same.

A product, or good, that is very elastic is, let’s say, apples. Apples are not something that people have to have. If the price of apples increases, then fewer people will buy them. When apples get too expensive, people will stop buying them or switch to another product. Maybe people will buy pears, or oranges, or some other kind of fruit. If the price of apples drops, people will buy more apples. Apples are an elastic good because when one variable changes, like price, the demand changes drastically.

Narrator: Now get ready to answer the question.

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A good is inelastic when people don’t care about the price. When a product, for example—toilet paper—gets really expensive, people will still buy it. If the price of toilet paper goes way down, people will still buy about the same amount. Something like toilet paper is a good that people need…so…that is what an inelastic good is. Umm…Elasticity means that the demand for a good, how much people want something, will change a lot if the price changes. If the price of apples gets really expensive, many people won’t buy apples. If the price of apples is very cheap, lots more people will buy apples. The demand changes a lot when the price changes. That is what elasticity is…how much the demand will change when the price goes up or down.