How is elasticity defined in the context of microeconomics?

Elasticity in microeconomics refers to the responsiveness of demand and supply to changes in various factors, such as price, income, or the price of related goods. This concept captures how sensitive consumers and producers are to changes in these factors. For example, if the price of a good increases, the degree to which the quantity demanded decreases, or the amount supplied increases, demonstrates elasticity.

Understanding elasticity helps economists and businesses predict how significant price changes will impact overall market behavior. When demand is elastic, a small change in price results in a larger change in quantity demanded, whereas inelastic demand leads to a smaller change in response to price fluctuations.

Other options might suggest different concepts that are not accurate descriptions of elasticity. For instance, measuring a good's popularity or indicating the flexibility of a price do not capture the nuanced relationship between quantity demanded or supplied and changing economic variables. Likewise, stating that consumer preferences are static does not align with how elasticity involves changes in behavior in response to price changes.