Elasticity refers to the responsiveness of one variable to changes in another variable. In economics, it is commonly used to describe how the quantity demanded or supplied of a good changes in response to changes in price.
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Elastic Good: A good is considered elastic if a small change in price leads to a large change in the quantity demanded. For example, luxury items like high-end smartphones tend to be elastic. If the price of a luxury smartphone increases significantly, many consumers are likely to forego the purchase or opt for a less expensive alternative.
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Inelastic Good: A good is considered inelastic if a change in price leads to a relatively small change in the quantity demanded. An example of an inelastic good is insulin for diabetes patients. Regardless of price changes, patients need insulin to manage their health, so the quantity demanded remains relatively stable even if the price increases.
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