What's elasticity?
http://www.google.com/#q=elasticity+economics
Elasticity, in economics, refers to the responsiveness of a variable (such as quantity demanded or quantity supplied) to changes in another variable (such as price or income). Specifically, it measures the sensitivity or degree of change in one variable resulting from a change in another variable.
To calculate elasticity, we use the formula:
Elasticity = (% Change in Quantity) / (% Change in Price)
If the resulting elasticity value is greater than 1, it indicates that the demand or supply is elastic, meaning that a small change in price leads to a relatively larger change in quantity demanded or supplied. On the other hand, if the elasticity value is less than 1, it means that the demand or supply is inelastic, indicating that a change in price has a relatively smaller impact on quantity.
Elasticity helps economists and businesses understand how consumers and producers will respond to changes in prices, incomes, or other factors. It provides insights into market behavior and assists in making informed decisions such as pricing strategies, tax policies, and determining the responsiveness of different goods or services to changes in the economy.