Economics
Intermediate

Price Elasticity of Demand

How responsive quantity demanded is to a change in price.

Formula

Ed=%ΔQd%ΔPE_d = \dfrac{\%\Delta Q_d}{\%\Delta P}

Variables

E_dElasticity of demand
\%\Delta Q_d% change in quantity
\%\Delta P% change in price

Example

Qty −20% when price +10%: E_d = −2 (elastic)

Did You Know?

Necessities like insulin are inelastic; luxuries and easily substituted goods are highly elastic.

elasticitydemandmicro