Elasticity
Intermediate Level
Global
Microeconomics
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Definition
A measure of how much the quantity demanded or supplied of a good responds to changes in price or other factors.
Detailed Explanation
Price elasticity of demand measures consumer sensitivity to price changes. Inelastic goods (like medicine) see little demand change with price. Elastic goods (like luxury items) see significant demand changes.
Example
A 10% increase in petrol prices might only reduce consumption by 2%, showing inelastic demand.