We learned the law of supply and demand. When
the price of a good increases, the quantity
demanded of the good decreases. Similarly, when
the price of a good increases, the quantity supplied
of the good increases. So we learned the direction
of the change. Yet we have not examined the
magnitude of change. Elasticity will allow us to
measure of this magnitude.
Elasticity is a measure of how much buyers and
sellers respond to changes in market conditions.
When studying how some event or policy affects a
market, we can discuss not only the direction of
the effects but also their magnitude.