Explain the concept of price elasticity of demand

Price elasticity of demand is an economic concept that economists use to understand how demand is affected by changes in price. Formally, it explains the responsiveness to demand to a change in price. When a good is highly elastic, a price change will affect demand significantly. When a good is very inelastic, demand is not affected. Practically this concept is important. Suppose a government decides to raise the tax for alchohol (to reduce consumption) and thus through the tax increases the price of alchohol. It needs to understand how a increase in price will affect demand for alchohol as this will affect the revenue it gets from the tax and whether the tax has the desired effect. Thus price elasticity is an important concept.