Elasticity of Trade

Elasticity of trade measures how sensitive the amount of goods a country exports or imports is to changes in prices or other factors like income or tariffs. If trade is highly elastic, a small change in price or policies can cause a large shift in trade volume. Conversely, inelastic trade means prices or policy changes have little effect on trade flows. This concept helps understand how flexible or responsive trade patterns are to economic adjustments, informing policymakers on the potential impact of tariffs, exchange rate changes, or economic growth on international trade levels.