Final answer:
The ability of services to grow or shrink based on need is known as elasticity, an economics concept that measures how one variable responds to changes in another variable, such as changes in demand due to shifts in consumer income.
Step-by-step explanation:
The ability of services to grow or shrink based on need is called elasticity. This term is a key concept in economics that refers to the responsiveness of one variable to changes in another variable. For example, in market economics, when we talk about the income elasticity of demand, we are referring to how the quantity demanded of a good or service changes in response to a change in consumers' income.
Elasticity is not merely a theoretical concept; it has practical applications in real-world economics, such as adjusting the supply of products or services based on changing market demands. A very relatable example of elasticity can be seen when comparing a tennis ball and a brick being dropped from a height. The tennis ball, which bounces back, demonstrates greater elasticity in comparison to the brick, which doesn't – analogous to how services or goods in a market can respond flexibly to changes in economic conditions.