Both demand and supply curves show the relationship between price and the number of units
demanded or supplied. Price elasticity is the ratio between the percentage change in the quantity
demanded, Qd, or supplied, Qs, and the corresponding percent change in price. The price elasticity
of demand is the percentage change in the quantity demanded of a good or service divided by the
percentage change in the price. The price elasticity of supply is the percentage change in quantity
supplied divided by the percentage change in price.
Elasticities can be usefully divided into three broad categories: elastic, inelastic, and unitary. An
elastic demand or elastic supply is one in which the elasticity is greater than one, indicating a high
responsiveness to changes in price. An Inelastic demand or inelastic supply is one in which
elasticity is less than one, indicating low responsiveness to price changes. Unitary elasticities
indicate proportional responsiveness of either demand or supply