Elasticity of Demand is a core concept in microeconomics (Microeconomics) that measures how sensitive the quantity demanded of a good is to changes in its determinants—primarily price, income, or the price of related goods.
Elasticity of Demand is the percentage change in quantity demanded divided by the percentage change in one of the variables that affect demand. Price elasticity of demand measures how much a product’s consumption changes in response to price changes.
What is Elasticity of Demand?
- An elastic demand is one where there is a significant shift in the quantity demanded as a result of a price change.
- The elasticity of demand describes how sensitive a good’s demand is to changes in other economic variables like prices and consumer benefits.
- Higher demand elasticity for an economic variable indicates that the customers are more conscious of changes in this variable.
