Elasticity and inelasticity of demand refer to how much demand stretches when something else changes. Own price elasticity refers to the percentage change in quantity demanded divided by percentage change in price (actually the negative of that ratio since demand falls when price rises). If quantity demanded falls by 10 percent when price rises by 5 percent then the good has an elasticity of 2.

Elasticity changes along the demand curve. The elastic region of demand is where elasticity is greater than one (where prices are high) and the inelastic region is where elasticity is less than one. In the elastic region a reduction in price increases total revenue and vice versa for the inelastic region.

There are other elasticities. Income elasticity is the percentage change in quantity demanded divided by percentage change in income. Likewise, cross price elasticity is the percentage change in the quantity demanded divided by the percentage change in the price of another good (a substitute or complement).