Final answer:
Price elasticity of demand measures how much the quantity demanded of a good or service changes in response to a change in its price, indicating the degree of consumer sensitivity to price changes.
Step-by-step explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to price changes. This economic metric is calculated by dividing the percentage change in quantity demanded by the percentage change in price. The outcome indicates whether the demand is perfectly inelastic, inelastic, unit elastic, or elastic. These categories reflect different levels of consumer sensitivity to price adjustments, which in turn influence how sales of a product might change due to a change in its price.
Elasticity can also be applied to other determinants of demand, such as income, tastes, and prices of related goods, as well as to the quantity supplied, which is affected by factors such as the cost of production.