Flashcard Definition
Elasticity refers to how responsive the quantity demanded of a product is to changes in price or other factors.
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Flashcard
Elasticity is used to tell us how the market might react to a change in price. For example, if the quantity demanded of ice cream significantly reduced when price increases, this means demand elasticity is high.
When considering elasticity during economic downturns, we can consider the different types of goods and their demand. During periods of high unemployment, we might expect demand for luxury clothing to decrease. However, demand for toilet paper and washing up liquid may be unaffected.