When considering demand elasticity, what does it mean if the value is less than -1?

When the value of demand elasticity is less than -1, it indicates that demand is elastic. This means that the quantity demanded of a product is highly responsive to changes in price. Specifically, a percentage decrease in price will lead to a larger percentage increase in the quantity demanded and vice versa.

When demand is elastic, consumers are more likely to alter their purchasing decisions in response to price changes. For example, if the price of a good decreases by 10%, the quantity demanded may increase by more than 10%. This behavior is typical for goods that have readily available substitutes or are not necessities, allowing consumers to easily switch to alternatives if the price of the original good rises.

In contrast, if demand were inelastic (a value between 0 and -1), it would mean that consumers do not significantly change their quantity demanded with price changes. Unitary demand would imply that a price change results in a proportional change in quantity demanded, represented by a elasticity value of -1. Perfectly inelastic demand indicates that quantity demanded does not change at all in response to price changes, corresponding to an elasticity of 0. Therefore, a value less than -1 categorically confirms that demand is elastic.