What does elasticity measure?

Elasticity measures the sensitivity of one variable to changes in another variable. This concept is crucial in economics as it helps to understand how responsive demand or supply is to changes in factors such as price, income, or the price of related goods. For example, the price elasticity of demand indicates how much the quantity demanded of a good will change in response to a change in its price. A high elasticity means that consumers are very responsive to price changes, while low elasticity indicates that demand is relatively inelastic and does not change much with price fluctuations.

In contrast, the change in price over time refers to price trends but does not capture the relationship between changes in two variables. The overall market equilibrium pertains to the point where supply equals demand but does not measure responsiveness. Total revenue, while related to elasticity in the aspect of how changes in price affect it, does not directly measure the sensitivity itself. Thus, the focus of elasticity as a measure is specifically on the relationship and responsiveness between different economic variables.