What term refers to the economic analysis of how much the quantity demanded responds to changes in price?

The term "Price Elasticity of Demand" precisely describes the economic analysis focusing on how the quantity demanded of a good or service changes in response to variations in its price. This concept measures the sensitivity of consumers to price changes, illustrating whether a price increase will lead to a significant drop in demand or if consumers will continue purchasing despite higher prices.

Understanding price elasticity is essential for businesses in setting prices and anticipating consumer behavior, as well as for policymakers in evaluating the possible effects of taxation and subsidies. For instance, if a product is considered elastic, a small change in price can lead to a larger change in the quantity demanded, indicating a higher sensitivity among consumers. Conversely, if a product is inelastic, changes in price will have a minimal effect on demand.

The other concepts listed, such as income elasticity and diminishing returns, focus on different aspects of economic behavior and do not specifically pertain to the relationship between price changes and quantity demanded. Demand analysis is a broader term that may encompass multiple analyses, including price elasticity, but does not specifically define the responsiveness of demand to price changes.