Fuel and travel costs are pushing prices up again
Thursday 5 November 2026
Inflation has risen to 3.1%, meaning everyday spending is getting more expensive just as household budgets are already under pressure.
Price elasticity of demand
How strongly the amount people buy responds when its price changes.
What it means
Compare the percentage change in the amount bought with the percentage change in price. If a small price rise leads to a large fall in buying, demand is more elastic: buyers are quite responsive. If buying changes little, it is less elastic. The usual calculation holds other things, such as people's incomes and the availability of substitutes, the same. Elasticity can be written as a negative number for a normal price rise, because price rises while buying falls; some accounts simply give its size as a positive number.
Example
At £10 each, customers buy 100 items; at £11 each, they buy 80, with other conditions assumed unchanged. Price rose 10% and quantity bought fell 20%, so the illustrated elasticity is −2, or 2 in size. This is more responsive than a fall of only 5% would have been.
Why it matters
It helps explain why putting up a price may lose many customers in one market but few in another, and why alternatives matter.
Also known as
demand price elasticity
Related terms
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Barriers to entry
Obstacles that make it hard for a new business to start competing in a market.
Read more -
Market power
A business's ability to influence prices or conditions because customers or suppliers have limited alternatives.
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Monopoly
A market with only one seller of a particular good or service and no close alternative for buyers.
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