Definition
Marshall (1890): “Elasticity of demand measures the responsiveness of quantity demanded to a change in price.”

Introduction
Elasticity tells how sensitive customers are to price changes — vital for profit planning.

Explanation

Elastic Demand (>1): small price change → large volume change (luxuries).

Inelastic (<1): price change → small volume impact (necessities). Unit Elastic: equal change in price and quantity. Key Takeaways Know elasticity before changing prices. Inelastic markets permit premium pricing. Real-World Case – Cigarettes remain price-inelastic; tax rises don’t drastically cut sales. Reference: WHO Tobacco Report.