Economics
Intermediate

Price Elasticity of Demand

Responsiveness of demand to price changes.

Formula

Ed=%ΔQ%ΔPE_d = \frac{\%\Delta Q}{\%\Delta P}

Variables

QQuantity
PPrice

Example

Elastic if |E|>1

Did You Know?

Price elasticity explains why cigarette taxes cut demand only slightly but luxury demand collapses.

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