Elasticity of demand

The elasticity of demand is its responsiveness to changes in another factor, such as price. British economist Alfred Marshall is generally credited as the first economist to define the concept in 1890, but the German statistician Ernst Engel published a paper five years earlier, showing how changes in income alter the level of demand. The origins of the concept may be disputed, but its importance is not.

Where does the demand curve come from? In order to explain why individuals choose different quantities at different prices, we will use a model with three components: