As we learned in our study of demand and supply, the market price and desired quantity demanded are inversely related; meaning, an increase in price leads to a decrease in the desired quantity demanded and vice versa. We also learned that the market price and desired quantity supplied are directly related; meaning, decreases in market price lead to decreases in the desired quantity supplied and vice versa.
In addition to knowing the direction of a change in the desired quantity
demanded or supplied, it would be useful to be able to say something
about the size of those changes. We need a simple measure for the extent of a
change in the desired quantity demanded or supplied, resulting from
a change in the market price. Economists use a measure known as the
elasticity of demand or supply to quantify the strength of the relationship
between a change in price and desired quantity.
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