ELASTICITY AND ITS MEASUREMENT

All other factors remaining the same, the law of demand states that there is an inverse relationship between the price of a commodity and its quantity demanded. I.e. the demand for a commodity falls when its price rises and vice versa. On the other hand, the law of supply states positive relations between quantities supplied and price of a commodity, all other things remaining the same I.e. the supply of a commodity falls when its price falls and vice versa.

Both laws show the direction of change in demand and supply due to a change in price. But, they do not explain how much quantity will change with respect to change in price. This can be explained by the elasticity of demand and supply.