Elasticity of demand is the sensitivity of quantity demanded of a commodity in response to the change in factors related to that commodity. Elasticity of demand may be of different types, depending upon the factor that is responsible for causing the change in demand. Among them, price elasticity of demand is one of the most common types and is also the most relevant to business.
Price elasticity of demand can be a useful tool for businessmen to make crucial decisions like deciding the price of goods and services. It plays vital role in other business procedures too. These uses are described below in brief.