Elasticity is a measure of responsiveness or sensitivity to changes in one variable relative to another variable. It helps us understand how much one variable will change in response to a change in another variable.
Imagine you're driving on a highway with different speed limits. If your car can quickly adjust its speed when the limit changes, it has high elasticity. But if your car takes a long time to accelerate or decelerate, it has low elasticity.
Price Elasticity: Price elasticity measures the responsiveness of quantity demanded or supplied to changes in price.
Income Elasticity: Income elasticity measures the responsiveness of quantity demanded or supplied to changes in income.
Cross Elasticity: Cross elasticity measures the responsiveness of quantity demanded or supplied of one good to changes in the price of another good.
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