What is demand and supply elasticity?

Elasticity = % Change in Quantity / % Change in Price.

Elasticity refers to how responsive supply and demand is to changes in prices. If supply and demand is more elastic, this means that small changes in price will lead to large changes in supply and demand, however if it is inelastic, even a large change in price will not cause supply or demand to increase or decrease drastically. An example of an inelastic market is tobacco, due to the high rates of addiction to the substance. In the real world, this means that even if the prices are raised, it is unlikely to largely affect the demand for cigarettes or related products. On the other hand, an elastic market is motor vehicles, meaning that changes to the price have a large impact on demand. Markets which are 'luxuries' rathen than 'essentials' are more likely to be elastic than inelastic.