Price elasticity of demand relates to the question of how consumers respond to a change in price. Will they cut back their purchases a lot or just a little when the price of an item rises?
Price elasticity of demand often depends on whether or not consumers can find an acceptable substitute for the product that is going up in price. When substitutes are plentiful, demand is more likely to be elastic because consumers have more freedom to adjust their spending decisions. They can choose to buy a comparable product at a lower price.
But when there are few acceptable substitutes, demand tends to be inelastic because consumers don't have as many options. For example, if producers raise the price of fuel, consumers can try to drive fewer miles or adjust their thermostats, but there is a limit to how much they can cut their fuel consumption. And if the price of a product like medicine goes up, consumers don't even have the option of cutting their consumption. There are no suitable substitutes for certain medicines, and taking the proper dosage is essential.