Elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. Elasticity is a measure of how much buyers and sellers respond to changes in market conditions. When studying how some event or policy affects a market, we can discuss not only the direction of the effects but their magnitude as well. To measure how much consumers respond to changes in these variables, economists use the concept of elasticity. Price elasticity of demand (ped): a measure of how much quantity demanded of a good responds to a change in the price of that good. Recall the law of demand: as p increases (decreases), qd decreases (increases) The question of this chapter is: by how much does qd respond: unresponsive cases responsive cases. Quantity = 40: availability of close substitutes, necessities versus luxuries, definition of the market, time horizon.