Related: Are cars a luxury or necessity?

Elasticity is the reaction of the quantity supplied or demanded to price changes. The degree of change in demand or supply depends whether the good is a necessity or a luxury. Gasoline for example is inelastic since consumers would keep filling their tanks to go to whichever place they needed to go. However, through time, when consumers realize their disposable income is squeezed because of a now much higher price of gasoline, they would minimize their driving only to go to work and a few important errands. Luxuries in times when the economy is rough doesn't sell well and are immediately replaced by the closest and cheapest substitute available. The degree of elasticity of a luxury item increases when there are more substitutes for it. Examples of highly elastic goods are vehicles, cheaper cars would be the primary choice when prices of luxury vehicles become too expensive. A simple example of substitutes would be butter and margarine, chicken and beef, candles and flashlights or a banana leaf and toilet paper.

Elasticity is 0 (Perfectly Inelastic)

Elasticity is 1 (elastic)

Elasticity is less than 1 (Inelastic)

Elasticity is greater than 1 (Highly elastic)

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