Elasticity

Elasticity is an economic concept that describes how certain variables respond to changes in other variables. It measures the degree of responsiveness of the variable in question to changes in the other variable. It is one of the most important concepts in economics and is used to analyze the behavior of markets and consumers. There are three types of elasticity: price elasticity, income elasticity and cross elasticity. Price elasticity measures the responsiveness of quantity demanded to changes in price. Income elasticity measures the responsiveness of quantity demanded to changes in income. Cross elasticity measures the responsiveness of one product to changes in the price of another.

Examples of Elasticity

Price Elasticity of Demand – This is the degree to which demand for a product or service changes when the price of the product or service changes. For example, if a 10% increase in price leads to a 15% decrease in demand, the price elasticity of demand for that product is -1.5.
Income Elasticity of Demand – This is the degree to which demand for a product or service changes when the income of the consumers changes. For example, if a 10% increase in income leads to a 15% increase in demand, the income elasticity of demand for that product is 1.5.
Cross Elasticity of Demand – This is the degree to which demand for one product changes when the price of another product changes. For example, if a 10% increase in the price of oranges leads to a 15% decrease in the demand for apples, the cross elasticity of demand between oranges and apples is -1.5.

Elasticity is a key concept in economics and is used to analyze the behavior of markets and consumers. It is used to understand how changes in prices, income and other factors affect the demand for a product or service. For further information on elasticity, please see the following articles from Wikipedia: