What is an unelastic demand?

Neelastic demand is a term used in economics to refer to a product in which demand does not exist on the basis of a price or supply. It is different from the vast majority of products in which supply and demand range along the price of the demand based on the price. There are certain limited products in which non -neelastic demand applies.

In standard economic theory, there is a supply and demand curve. According to this curve, when the supply of the product increases, the demand for the product will decrease in relation to the available offer. The seller will therefore be forced to reduce their prices to move their offers, so the demand will return as soon as the price is lower. This is sometimes referred to as a pareto optimal. The basic argument that most economists do in favor of the free market system are that it is appropriate to allow supplement and the demand of the curve decide on the price, because both the seller and the buyers will be in the best situation in which the supply and demand meet.

Suppose, for example, the toaster is launched for $ 100 (USD). Only those individuals who really want a toaster will be willing to pay so much. As a result, the supply may outperform demand and manufacturers will have to reduce the price of toaster.

If the toaster is on sale for $ 1, on the other hand people buy a toaster, even if they really do not want or do not need it, because the price is so low. Demand is likely to exceed the supply. The manufacturer as such will increase the price. In the end, the price will deal with the most optimal point in which suppliers can earn as much profit as possible without reducing demand so much that fewer people will end because fewer people buy.

However, the demand for certain Strroducts is inflexible. Neelastic demand refers to those products in which people want the item so much will pay any price for it. Demand is not affected by price and demand will not decrease. Supply curve and demandIt tends to zero and the optimum price will never be reached.

There is no non -selastic demand for many products. Life drug is one example of a product for which there would be an inflexible demand. Such a demand would exist for this particular product, because people would pay costs no matter how high it was, and as such the manufacturer could charge anything he liked.