Elasticity is a measure of how much one thing changes when something else changes. In economics, it usually refers to how much the demand or supply of a product changes when its price changes. If a small price increase causes a big drop in demand, the product is "elastic."
Example: A 10% price increase on luxury handbags might cause a 30% drop in sales — that is elastic demand (elasticity > 1). But a 10% increase in the price of insulin? Diabetics still need it, so demand barely changes — that is inelastic demand (elasticity < 1).
There are several types: price elasticity of demand, price elasticity of supply, income elasticity, and cross-price elasticity. Governments use elasticity to decide which goods to tax — taxing inelastic goods (like cigarettes) raises revenue without reducing consumption much. Businesses use it to set optimal prices.