The concept of elasticity refers to the responsiveness of _____ to changes in price.

Study for the VirtualSC Economics Honors Exam. Utilize flashcards and multiple-choice questions, each with hints and explanations. Get prepared for your exam!

The concept of elasticity indeed refers to the responsiveness of both supply and demand to changes in price. Elasticity measures how much the quantity supplied or quantity demanded of a good will change when there is a change in its price.

In the context of demand, price elasticity of demand indicates how much the quantity demanded of a product shifts in response to a price change. If demand is elastic, a small price drop can lead to a significant increase in quantity demanded. Conversely, if demand is inelastic, quantity demanded may not change much despite price fluctuations.

Similarly, in terms of supply, the price elasticity of supply captures how the quantity supplied of a good reacts to price changes. If a good is supply elastic, producers may increase production significantly in response to price increases. In contrast, if it is supply inelastic, the quantity supplied may not respond much to price changes.

Thus, the correct answer encapsulates the essence of elasticity by highlighting that it applies to both the quantities that sellers are willing to supply and the quantities that consumers are willing to purchase as prices fluctuate.

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