Price elasticity of demand

Price elasticity of demand is a measure of how much people will change their behavior, like how much they will buy or not buy something, when the price of that thing changes. It's a way for us to figure out how much people care about the price of something.

So, imagine you really like ice cream. If the price of ice cream goes up just a little bit, you might still want to buy it because you really like it. But, if the price goes up a LOT, you might decide that it's too expensive and you won't buy it anymore. That means you are very sensitive to the price of ice cream, and the demand for ice cream is elastic.

On the other hand, let's say you're really thirsty and you need a drink of water. If the price of water goes up a little bit, you'll still need to buy it because you need to quench your thirst. But, even if the price goes up a LOT, you'll still buy it because you really need it. That means you aren't very sensitive to the price of water, and the demand for water is inelastic.

Overall, the more elastic the demand for a product is, the more people will change their behavior when the price changes. The more inelastic the demand for a product is, the less people will change their behavior when the price changes.