Elasticity
Plain definition
Elasticity measures how responsive one economic variable is to a change in another, expressed as the ratio of their percentage changes. Because it uses percentages, it is unit-free, so the responsiveness of petrol demand to price can be compared with that of cinema tickets.
In economics
Elasticity is the workhorse concept for predicting how markets react: tax burdens fall more heavily on the less elastic side, and revenue effects of price changes depend on demand elasticity. Economists usually compute it as (percentage change in Y) divided by (percentage change in X), with the midpoint (arc) formula used to avoid the starting-point bias of simple percentage changes.
Example
If a 10 percent fare hike cuts metro ridership by 15 percent, the elasticity of ridership with respect to fare is 1.5 in absolute value. That is elastic: ridership falls proportionally more than the fare rises, so total fare revenue drops.
Elasticity is often confused with slope. A demand curve's slope depends on the units (rupees per kilo versus dollars per tonne), while elasticity is unit-free because both changes are in percentages. A steep-looking curve can be elastic and a flat one inelastic — you cannot read elasticity straight off the graph's steepness.