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What does elasticity measure in economics?
how the amount of a good changes when the producer hires more employees
how the amount of a good changes when the producer uses new materials
how the amount of a good changes when its price goes up or down
how the amount of a good changes when its distribution expands
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The third option: "how the amount of a good changes when its price goes up or down."
More precisely, elasticity measures the percentage change in one variable (e.g., quantity demanded or supplied) in response to a one percent change in another variable (e.g., price). For price elasticity of demand: elasticity = (% change in quantity demanded) / (% change in price). Values >1 mean elastic (responsive), <1 mean inelastic (not very responsive), =1 unitary. There are also income elasticity and cross-price elasticity for other relationships.
More precisely, elasticity measures the percentage change in one variable (e.g., quantity demanded or supplied) in response to a one percent change in another variable (e.g., price). For price elasticity of demand: elasticity = (% change in quantity demanded) / (% change in price). Values >1 mean elastic (responsive), <1 mean inelastic (not very responsive), =1 unitary. There are also income elasticity and cross-price elasticity for other relationships.
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