The law of demand states that that there is and inverse relationship between price and quantity demanded. However, it does not explain as to how much change will take place in demand as a result of a given change in price. In the case of some commodities, a slight change in price may lead to a considerable change in its demand while in the case of some other commodities a considerable change in price may lead to a slight change in its demand; the concept of elasticity of demand explains the definite relationship between changes in price and demand.
The change in quantity demanded due to change in price is known as elasticity of demand. In other words, elasticity of demand indicates the responsiveness of the consumer which is reflected in the form of changes in demand as a result of changes in price.
Stonier & Hague have defined elasticity of demand in the following words:
“Elasticity of demand is a technical term used by economists to describe the degree of responsiveness of the demand for a good to a change in its price”.
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Thus in short, elasticity of demand may be defined as the degree of responsiveness of demand for change in the price of a commodity. Mathematically, it is the ratio of proportionate change in demand to proportionate change in price.