>>12937175Elasticity of two parameters asks the question a percent change in one occurs per unit percent change in another. If your familiar with calculus 101 you should understand this concept intuitively, just remember to cancel units by multiplying your derivative by the proportion of P and Q one is at. At the end of the day we are asking about the slope of the demand curve at a particular point on its path.
The price elasticity of demand describes the sensitivity of a market to a small change in price or quantity demanded.
Consider a very steeply sloped demand curve, find the rate of change of that curve. One may notice we travel far down the y-axis (price) for every small change in quantity. Reflect on the opposite, shallowly sloped curve. A small price change responds dramatically with quantity demanded. An inelastic good speaks volumes about the substitutability of the good. If the price is inelastic, like crude oil, than even small supply shocks can cause dramatic price swings.
