What is the concept of price elasticity of demand?

Price elasticity of demand (PED) is a measure of how sensitive the quantity demanded of a good or service is to changes in its price. If the demand for a product changes significantly when its price changes, the product is considered elastic. In contrast, if the demand remains relatively stable even when the price changes, the product is considered inelastic. For example, luxury goods tend to have elastic demand, as people may cut back on their purchases when prices rise. Necessities, such as basic food items, tend to have inelastic demand because consumers will continue to purchase them despite price increases.