Which of the following describes the concept of price elasticity in economics?

The concept of price elasticity in economics specifically refers to the responsiveness of the demand for a product to changes in its price. When the price elasticity of demand is high, it means that consumers will significantly reduce their quantity demanded if the price increases, or conversely, they will greatly increase their quantity demanded if the price decreases. This sensitivity to price changes is crucial for businesses as it helps them understand consumer behavior and make informed pricing decisions.

In contrast to this concept, the other options do not accurately capture the idea of price elasticity. The relationship between supply and demand does not specifically focus on how demand responds to price changes; rather, it examines how both supply and demand interact in the market to determine price levels. The ability of a company to reduce prices does not inherently relate to whether or not consumers will change their purchasing behavior in response. Lastly, fixed costs pertain to production expenses that do not fluctuate with the level of output, which is a separate concern from price elasticity and demand responsiveness.