Demand elasticity is a measure of how sensitive the quantity demanded of a good or service is to changes in its price or other determinants. It quantifies the responsiveness of consumer demand to alterations in factors like price, income, or the prices of related goods. The formula for elasticity, expressed as the percentage change in quantity demanded divided by the percentage change in the influencing factor, yields insights into consumer behavior. If the elasticity is greater than 1, it indicates elastic demand, meaning consumers are responsive to price changes, resulting in a proportionally larger change in quantity demanded. If it’s less than 1, the demand is inelastic, suggesting consumers are less responsive, and changes in price lead to proportionally smaller quantity changes. A result of 1 denotes unitary elasticity, indicating a proportional relationship between changes in price and quantity demanded. This concept is vital for businesses and policymakers as it informs pricing decisions, aids in forecasting demand fluctuations, and helps predict the effects of economic policies on consumer behavior, allowing for more informed and strategic decision-making.