Which of the following best defines elasticity in economics?

Elasticity in economics refers specifically to the responsiveness of demand or supply to changes in price. It measures how sensitive consumers and producers are to price fluctuations. For example, if the price of a good increases and consumers significantly reduce their quantity demanded, that good is considered elastic. Conversely, if a price change results in little to no change in the quantity demanded, that good is considered inelastic.

This concept is crucial because it helps businesses and policymakers understand consumer behavior, forecast revenue changes, and make informed decisions regarding pricing strategies and market interventions. An understanding of elasticity allows for better analysis of how different goods and services fit into broader economic patterns.

Other options, on the other hand, do not accurately encapsulate the concept of elasticity. The measurement of price changes focuses solely on price without considering the reaction from consumers or producers. The constant nature of consumer preferences and the stability of a market over time pertain to different economic concepts and do not address how demand or supply responds to price variations. Therefore, the second choice accurately captures the essence of elasticity in economics.