elasticity in economics

Elasticity in economics refers to how responsive the quantity demanded or supplied of a product is to changes in price or other factors. If a small price change leads to a significant change in quantity sold, the product is considered "elastic." For instance, luxury items often have high elasticity, while necessities, like bread, are typically inelastic. Understanding elasticity helps businesses and policymakers make informed decisions about pricing, taxation, and resource allocation, as it indicates how consumers might react to changes in market conditions.