Price elasticity of demand is defined as the responsiveness of demand to changes in price.
In other words, price elasticity of demand measures how much the quantity demanded of a good or service changes in response to a change in its price. If the quantity demanded of a good or service changes significantly in response to a change in price, then the demand is said to be elastic. On the other hand, if the quantity demanded of a good or service changes only slightly in response to a change in price, then the demand is said to be inelastic.
For example, if the price of a luxury car increases by 10%, and as a result, the demand for that car decreases by 20%, then the demand is said to be elastic. This means that consumers are very responsive to changes in price, and a small change in price can have a significant impact on the quantity demanded.
Therefore, price elasticity of demand is a measure of how sensitive consumers are to changes in price and is an important concept in economics for businesses and policymakers to consider when making decisions about pricing and taxation.