Elasticity of demand measures how responsive the quantity demanded of a good is to changes in factors like price. There are three main types of elasticity of demand: perfectly elastic demand, where businesses cannot change prices without losing all customers; inelastic demand, where price changes cause small changes in quantity demanded; and unitary elastic demand, where the percentage changes in price and quantity are equal. Factors like availability of substitutes, income levels, and importance of the good can influence a product's elasticity of demand.