Economic sensitivity refers to how much a revenue source fluctuates in response to economic conditions. Some revenues are highly economically sensitive—development charges plummet during recessions when construction stops, while booming during growth periods. Others are less sensitive—property tax revenue remains relatively stable because property values and tax rates don't typically change dramatically year-over-year. Understanding economic sensitivity helps municipalities plan finances and manage risk. A revenue mix heavily dependent on economically sensitive sources creates volatility and budgeting challenges. Diversification across revenue sources with different sensitivities provides more stable, predictable funding. Reserves can buffer against temporary declines in sensitive revenues. Financial analysts assess economic sensitivity when evaluating municipal fiscal health and credit ratings, as high sensitivity indicates greater vulnerability to economic cycles.