Elasticity of Demand

Lesson

Part 1 — how much buyers respond to a price change, the five degrees, the percentage method and the total expenditure method.

In this lesson you will

Define price elasticity of demand and draw the five degrees
Calculate price elasticity by the percentage method and find an unknown price or quantity
Judge whether demand is elastic, unitary or inelastic from changes in total expenditure

Part 1 at a glance

Concept

What price elasticity measures

Price elasticity of demand (Ed) is the degree of responsiveness of the quantity demanded of a good to a change in its own price.

Ed = percentage change in quantity demanded ÷ percentage change in price.

A ratio of two percentage changes

Diagram

Schematic, imagined figures: the three special degrees of price elasticity.