Alfred Marshall and the Measure of a Market's Sensitivity

This article records tradition as it has been passed down and reported. Its sources are not yet part of the atlas's verified catalogue.

Alfred Marshall wanted a single number that could answer a question buyers, sellers and governments all ask in different words: how much does demand for this good actually change when its price moves? In Principles of Economics, first published in 1890 and revised across eight editions over the following three decades, he supplied it, elasticity, the ratio of the percentage change in quantity demanded to the percentage change in price. A good with elastic demand, a specific brand of soft drink competing with dozens of substitutes, loses buyers fast when its price rises. A good with inelastic demand, insulin for a diabetic patient, keeps its buyers regardless. Marshall built the concept as part of a broader project synthesizing classical cost-of-production theory with the new marginal-utility economics of Jevons, Menger and Walras into what became the neoclassical mainstream, and elasticity remains one of the few pieces of first-year economics that shows up, unchanged, in central bank reports, tax policy debates and antitrust litigation alike.