What measures how responsive the quantity demanded of a good is to a change in its price?

The concept that measures how responsive the quantity demanded of a good is to a change in its price is known as the Price Elasticity of Demand. This economic principle quantifies the relationship between price changes and changes in the quantity demanded. A highly elastic demand indicates that even small changes in price will lead to significant changes in the quantity demanded, whereas inelastic demand suggests that quantity demanded is less responsive to price changes.

Price Elasticity of Demand is crucial for businesses and policymakers as it helps in understanding consumer behavior and making informed pricing decisions. For example, if a product has a high price elasticity, a company might lower prices to increase sales volume, while a good with low elasticity might allow for higher prices without significant loss of demand.

The other concepts, such as Income Elasticity of Demand and Cross Elasticity of Demand, deal with different aspects of demand responsiveness. Income Elasticity measures how demand changes with changes in consumer income, while Cross Elasticity assesses how the quantity demanded of one good changes in response to price changes of another good. The Demand Curve visualizes these relationships but does not measure responsiveness itself.