Elasticity

Elasticity is the degree to which supply is sensitive to demand and vice versa. In other words, it is a measure of responsiveness.

Elasticity of demand is a measure of how sensitive the quantity of something demanded is to changes in its supply.

Elasticity of supply is a measure of how sensitive the quantity of something supplied is to changes in the price.

Examples of demand elasticity: What happens to the demand for gasoline when the price goes up by 1%? What happens to demand for jewelery when the price goes up by 1%?

Examples of supply elasticity: What happens to the supply of paintings by Leonardo when their price increases by 1%? What happens to the supply of beef when the price increases by 1%?

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