Which of the following best describes the concept of elasticity of demand?

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The extent to which demand for a good changes when the price of a substitute good changes

The extent to which demand for a good changes when the price of the good changes

The extent to which supply of a good changes when the price of the good changes

The extent to which demand for a good changes when the income of the consumer changes

answer is B.

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Detailed Solution

The elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to changes in the price of that good. If the demand for a good is highly elastic, then a small price change will result in a large change in the quantity demanded. Conversely, if the demand for a good is highly inelastic, then a price change will have little effect on the quantity demanded.

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