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Microeconomics
Elasticity measures how responsive consumers are to various changes. These include changes to the price of the product, to the price of substitute products, and even to changes in their own incomes.
The important elasticity measures that affect consumers are known as: the "price elasticity of demand", the "cross price elasticity" and the "income elasticity of demand".
Producers also respond to changes in the economic environment and the degree to which they react is measured as the "price elasticity of supply".
Understanding the degree to which consumers and producers react gives us insights into what happens to quantity demanded and also to revenues if a business changes the price of its product, or if the price of a related product changes, or if income changes.
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