Which statement accurately describes the concept of elasticity in economic terms?

The concept of elasticity in economic terms fundamentally relates to the responsiveness of demand or supply to changes in price. When we say that demand is elastic, it means that a small change in price leads to a significant change in the quantity demanded. Conversely, if demand is inelastic, price changes have little impact on the quantity demanded. This principle applies similarly to supply, where elasticity measures how much the quantity supplied changes when there is a change in price.

Understanding elasticity is crucial for businesses when setting prices, as it helps predict how changes can affect consumer behavior and overall revenue. For instance, if a company knows that its product has elastic demand, lowering the price could lead to a substantial increase in sales volume, enhancing overall revenue. This insight aids in strategic decision-making, making option B the most accurate description of elasticity in economic terms.