What does "elasticity" mean in terms of economics?
Answer:
The previous answers give a half-baked and incomplete description.
An elasticity is the percentage change in one variable given a percentage change in another variable.
Here is a precise example. Suppose the price elasticity of demand for good X is 0.5 and good X currently costs $10 per unit and has a market demand of 1 million units.
If the price of good X increases by 10% (i.e, it goes from $10 to $11) then we expect the demand for the good to fall by 50,000 units (or 1 million * 0.5 * 10%).
The previous posts are incomplete because they simply explain that their is a relationship. However, as you can see above, an elasticity is a precisely defined relationship that is more than just simple positive and negative relationships. In other words, an elasticity of one variable with respect to another is NOT the same thing as the derivative of one variable with respect to another, which is what the previous posters are describing.
Just so that I don't get criticized for providing an incomplete answer, there is a special class of functions that have constant elasticities. These functions have elasticities that are invariant to the numerical level used (i.e., the elasticity is the same if x=1 or x=10000000. This specific scenario is consistent with the answers given by the previous posters. My answer is more general and applies to any continuous function.
Elastic is a propensity to vary and in elastic is a comparson to less.
Jane's need for sleep is in-elastic since she needs 8-hours every night no matter what and 7-hours will never do.
Joe;'s need is elastic since he can sleep anywere from 4 hours to 12 and still be effective.
Elasticity generally refers to the sensitivity of demand of an object in relation to prices. An elastic good has high deman sensitivity to price, while an inelastic good has a low sensitivity.
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers: