🔹 The Conceptual Foundations of Elasticity

Question 1

What is elasticity in economics?

Answer 1

The ratio of percentage changes that captures how much one variable responds to a change in another.

Elasticity is unit-free, allowing comparisons across products, markets, and countries.

Question 2

What does elasticity allow economists to examine?

Answer 2

Proportionate responsiveness of variables, particularly how demand changes with price.

It reveals not just that demand falls when price rises, but by how much and under what conditions.

Question 3

How does elasticity relate to demand curves?

Answer 3

It provides insights into the sensitivity of demand to price changes.

Elasticity measures economic sensitivity or consumer volatility.

Question 4

What is the significance of elasticity being unit-free?

Answer 4

It allows for comparisons of responsiveness across different contexts without unit distortion.

This is crucial for analyzing various economic scenarios comprehensively.

Question 5

What does a high elasticity indicate?

Answer 5

A significant change in demand with a small change in price.

This suggests high consumer sensitivity to price changes.

Question 6

What does a low elasticity indicate?

Answer 6

A minimal change in demand with a significant change in price.

This reflects low consumer sensitivity to price fluctuations.

Question 7

Fill in the blank: Elasticity captures __________ responsiveness of one variable to changes in another.

Answer 7

[proportionate]

Question 8

True or False: Elasticity can only be applied to a single market.

Answer 8

False

Elasticity is applicable across multiple markets and products.