Define the term "elasticity" in economics.

Elasticity in economics measures how sensitive or responsive the quantity demanded or supplied of a good or service is to changes in its price. This concept is crucial because it helps to understand consumer behavior and how markets react to changes. For instance, if the price of a product increases and the quantity demanded decreases significantly, we say that the demand for that product is elastic. Conversely, if the price increases and the quantity demanded remains relatively unchanged, the demand is considered inelastic.

This responsiveness can guide businesses and policymakers in making informed decisions regarding pricing strategies, taxation, and understanding consumer behavior. An understanding of elasticity is essential in analyzing how changes in prices can affect total revenue and market dynamics.

In contrast, other definitions provided do not accurately encompass the broader concept of elasticity. For example, the responsiveness of supply to changes in demand does not describe elasticity accurately, as elasticity focuses more on price changes rather than interrelations between demand and supply. The notion of price stability does not address elasticity at all, as it pertains to price fluctuations rather than responsiveness to those fluctuations. Lastly, the relationship between income and consumer spending discusses income elasticity but does not capture the broader price-related elasticity concept. Thus, the correct definition revolves around the responsiveness of quantity demanded or supplied to price changes