What is elasticity of demand and how do you work it out?

Elasticity of demand, or more formally Price Elasticity of Demand (PED) is a measure of the extent to which the amount of a good demanded by consumers varies with response to a change in its price. It can be measured by the percentage change in quantity demanded divided by the percentage change in the price. As increases in price almost always cause a drop in demand (with the rare exception of Giffen goods), PED is usually a negative number (or 0) ranging from 0 (perfectly inelastic demand) to minus infinity (perfectly elastic demand).