The concept of elasticity in economics helps us understand how one economic factor changes in response to another. It measures the percentage change in one variable caused by changes in another. This concept is crucial for companies to set prices, for consumers to decide how to spend or save money, and for governments to create tax policies. Elasticity can be applied to various aspects like demand, supply, cost, production, and labor force. By using elasticity, we can see how changes in one variable affect another and what impact this has on businesses and the economy.