Often, though, we need to measure how sensitive quantity demanded or supplied is to changes in the independent variables that affect them.
(Institute 8)
Institute, CFA. 2019 CFA Program Curriculum Level I Volume 2. CFA Institute, 5/2018. VitalBook file.
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But a change in the independent variables of a demand function result in shifts of the demand function/demand curve not a movement along the curve? Why is elasticity measured along the demand curve and not shifts of it?
Elasticity is a “stand-alone” measure that supposes, “cetiris-paribus”, other relevant variables stay constant.
Shifts in demand curves are caused by changes in factors different than the price of the good we analyzing. Those other factors are changes in income, changes in price of substitutes or complements, etc.
Elasticity measures percentage changes in quantity caused by percentage changes in the price of the good, so we move along the demand curve. Note that elasticity may differ in different points in the curve (not all curves are equally shaped along all its length).
Hope this helps.
Thanks, starting to get it.