We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is an Inelastic Demand?

By Christy Bieber
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Inelastic demand is a term used in economics to refer to a product in which the demand does not fluctuate on the basis of price or supply. It is distinct from the vast majority of products, in which supply and demand move along a given demand curve on the basis of the price. There are certain limited products in which inelastic demand applies.

In standard economic theory, a supply and demand curve exists. According to this curve, when supply of a product goes up, the demand for the product will go down in relation to the available supply. As such, sellers will be forced to lower their prices to move their supply, thus making the demand go back up once the price is lower.

Under free market principles, the theory of supply and demand suggests that every product will ultimately be sold for its optimal price. This is sometimes referred to as pareto optimal. The basic argument that most economists make in favor of a free market system is that it is appropriate to allow the supply and demand curve decide the price, since both the seller and buyer will thus be in the best situation in which supply and demand meet.

Assume, for example, that a toaster is put on the market for $100 US Dollars (USD). Only those individuals who really want the toaster will be willing to pay that much. As a result, the supply may outpace the demand and the manufacturers will need to drop the price of the toaster.

If the toaster goes on sale for $1 USD, on the other hand, people will buy the toaster even if they don't really want or need it since the price is so low. Demand will likely outpace supply. As such, the manufacturer will raise the price. Eventually, the price will settle at the most optimal point in which suppliers can make the most profit on a given unit without reducing the demand so much that they end up making less because less people buy.

For certain products, however, demand is inelastic. Inelastic demand refers to those products in which people want the item so much, they will pay any price for it. As such, demand is not affected by price and demand does not go down. The supply and demand curve has a slope of zero and the optimal price will never be reached.

Inelastic demand does not exist for many products. A life-saving drug is one example of a product for which there would be inelastic demand. Such demand would exist for that particular product because people would pay the cost no matter how high it was and as such the manufacturer could charge whatever it liked.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.