![]() If the price of the restaurant meal increases by 10%, the quantity demanded will decrease by 22.7%. Note that necessities such as housing and electricity are inelastic, while items that are not necessities such as restaurant meals are more price-sensitive. Transatlantic air travel (business class) Table 4 shows a selection of demand elasticities for different goods and services drawn from a variety of different studies by economists, listed in order of increasing elasticity. But first, let’s look at the elasticities of some common goods and services. Let’s explore how elasticity relates to revenue and pricing, both in the long run and short run. Studying elasticities is useful for a number of reasons, pricing being most important. Explain how the elasticity of demand and supply determine the incidence of a tax on buyers and sellers.Predict how the long-run and short-run impacts of elasticity affect equilibrium.Evaluate how elasticity can cause shifts in demand and supply.Analyze how price elasticities impact revenue.
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