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Elasticity

(1) The responsiveness of supply and demand to changes in price. Supply or demand that changes rapidly in response to price changes is “elastic.” Supply or demand that changes slowly in response to price changes is “inelastic.” (2) A measure of the responsiveness of tax yields to changes in economic conditions. The yield of an elastic tax increases rapidly in a growing economy. The yield of an inelastic tax increases slowly. Often measured by the formula: percent change in tax ÷ percent change in personal income.