Usually there is limited customer response from the power demand side. However， in a market environment， even very low elasticity can be helpful to ease a stressed demand-supply situation， and therefore contributes a lot to shed the uneconomical load and maintain the system reliability. This paper calculates and analyzes the impact of demand elasticity on the supply and demand equilibrium， and discusses the relationship between the price elasticity and the real time demand. Furthermore， considering the demand elasticity， a dynamic model of generation investment is built， and the development of generation capacity under two typical situations is compared through a case study that proves the effectiveness of the model.