Final answer:
Elasticity of demand quantifies the responsiveness of quantity demanded or supplied to price changes, with values greater than one indicating elastic demand and less than one indicating inelastic demand.
Step-by-step explanation:
The subject of the question is elastic demand and inelastic demand, two concepts in economics that define how the quantity demanded or supplied of a good or service is affected by changes in price. If the elasticity of demand is greater than one, this is referred to as elastic demand, indicating a high responsiveness to price changes. Conversely, when the elasticity of demand is less than one, it is termed as inelastic demand, which means there is a low responsiveness to price changes. A value of elasticity smaller than one signifies that a 1 percent increase in price leads to less than a 1 percent change in the quantity purchased by consumers.