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.
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.