These two measurements are interrelated, and are used in conjunction to understand market production and purchasing. Price elasticity of supply and elasticity of demand are both economic means of understanding price and demand sensitivity. Price elasticity expresses how much the price of a good or service is sensitive to supply. Inelastic pricing does not change significantly whenever supply changes. That is, if supply increases or decreases, the price remains about the same. Elasticity of demand expresses a similar concept; that is, inelasticity of demand describes a product or service that does not respond much in demand to a change in price. The two concepts differ in whether supply or demand is being considered. A change in price that does not cause a significant change in demand is an example of inelasticity of demand. Price inelasticity occurs when a change in supply does not significantly change prices.
Economists measure elasticity of demand and price elasticity of supply using ratios that illustrate the intimate connection between price, demand and supply. When the elasticity of demand ratio is valued near or at zero, the product is said to be inelastic, while values closer to one are elastic. The price elasticity of supply ratio has a coefficient that expresses elasticity. When values exceed one, the product supply is elastic; conversely, inelastic values fall below one. Demand elasticity is influenced by brand loyalty, necessity, and the use of substitute items and services, among other factors. Supply elasticity is impacted by availability to manufacturers of raw materials, adequate product transportation, inventories and production complexity, for example.