![]() In contrast, an inelastic variable (with an absolute elasticity value less than 1) is one which changes less than proportionally in response to changes in other variables. An elastic variable (with an absolute elasticity value greater than 1) is one that responds more than proportionally to changes in other variables. So, what elasticity does is that it can provide crucial information about the strength and weakness of such relationships.īased on the value of elasticity variables are categorized as elastic or inelastic. Basic demand and supply models explain that different variables like price, demand, income are generally related. Elasticity is a central concept in economics and has many applications. ![]() It is predominantly used to assess the change in consumer demand as a result of a change in a good or service's price.”Įlasticity is also defined in economics as the measurement of percentage change of one economics value in response to change in the other. In business and economics, elasticity refers to the degree to which individuals, consumers, or producers change their demand or the amount supplied in response to price or income changes. ![]() “Elasticity is a measure of a variable's sensitivity to a change in another variable, most commonly this sensitivity is the change in price relative to changes in other factors. Later in the blog, we will discuss the factors affecting the elasticity of demand.Īlso Read: What is Economics? Keynesian And Behavioural Economics We will also look at the way elasticity works. In this blog, we will be mainly discussing elasticity and its different types. However, they are further classified into sub-categories. Elasticity of demand and elasticity of supply are the two main types of elasticity. So, elasticity also covers these two terms. When we discuss the subject of economics, two of the most talked-about terms are- demand and supply. Each of these explains the effect of changes on a specific variable. In business and economics, elasticity refers to the degree of change, to which individuals, customers, producers, and suppliers alter demand and supply when variables like income is changed. It talks about the sensitivity of one variable due to a change in other variables. Elasticity is one such concept in economics. These concepts explain different phenomena. The subject of economics has several concepts that need our attention.
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