What does the concept of elasticity in demand measure?

The concept of elasticity in demand specifically quantifies how responsive the quantity demanded of a good or service is to changes in its price. When we refer to "price sensitivity," we are addressing how much consumers will alter their purchasing habits in reaction to price fluctuations. A product with high elasticity will see a significant change in quantity demanded when prices change, indicating that consumers are very sensitive to the price. Conversely, a product with low elasticity indicates that demand remains relatively stable despite price changes.

In understanding elasticity, it is also essential to differentiate it from other business concepts. For instance, consumer preferences (the first option) refer to the tastes and choices of consumers rather than how they respond to price changes. Supply chain efficiency (the third option) relates to the cost-effectiveness and productivity of the supply chain in delivering products, which does not directly address demand response to price. Market share (the fourth option) evaluates a company's portion of total sales in a market, which may be influenced by demand elasticity but is not a measure of how demand reacts to price changes.

Therefore, the correct answer centers on the measurement of price sensitivity in the context of consumer demand.