Why was "how much" used in the following context instead of "how many"?
Because it doesn't mean "the number of buyers and sellers" (countable), it means "the degree to which they respond" (uncountable).
"How many" would be grammatical, but with a different meaning.
Because it doesn't relate to "buyers and sellers", but it relates to "respond to changes."
So imagine it like this:
Elasticity is a measure of how much they respond to changes in market conditions.
Therefore it's not a measure of how many people do respond, but instead it is a measure of how people (their count isn't important here) react to changes in market conditions.