In economics, elasticity is the measure of how much buyers and sellers respond to changes in market conditions.

All price elasticity of demand have a negative sign, so it’s easiest to think about elasticity in absolute value.

When the elasticity is less than 1, we say that demand is inelastic.

**Formula to calculate elasticity.**

**Example:**

Suppose the percentage change of quantity demanded is 20% and the percentage change in price is 15%. Determine the elasticity of demand.

Thus, the elasticity of demand is 1.33.