In the context of economics, what is meant by "elasticity"?

Elasticity in economics refers to the responsiveness of one variable to changes in another variable. Specifically, it measures how much the quantity demanded or supplied of a good or service changes in response to a change in its price. When the price of a product changes, elasticity quantifies the extent of the effect on the quantity demanded or supplied. For instance, if a small change in price leads to a large change in quantity demanded, that product is considered to be highly elastic. Conversely, if quantity demanded changes little with a price change, the product is categorized as inelastic.

This concept is crucial for understanding consumer behavior and market dynamics, as it helps businesses and policymakers make informed decisions regarding pricing, production, and economic policy. Economists utilize elasticity to analyze how changes in market conditions can impact overall economic welfare and to gauge the effectiveness of fiscal measures.

The other options do not accurately capture the essence of elasticity in economics. For example, the measure of how customer preferences affect demand is more related to factors influencing demand rather than the elasticity itself. The percentage change in income over time does not pertain to price elasticity, and the fixed nature of supply in the market speaks to market structures rather than to the responsiveness captured by elasticity.