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Price Elasticity of Demand Price Elasticity of Demand is the responsiveness of quantity demanded to a change in price. PED = % change in quantity demanded % change in price Normally we would expect PED to have a negative sign since either price or quantity in the equation above will be a minus figure. The Value Ignoring the sign and concentrating on the absolute value of the figure, tells us whether demand or supply is elastic or inelastic. Below is a summary of the possible values. Elastic (PED> 1) where a change in the price causes a proportionately larger change in demand. Inelastic (PED <1) where a change in the price causes a proportionately smaller change in demand. Unit elasticity (PED = 1) where demand changes by the same amount as the price. Examples Here are some examples of how to calculate the price elasticity of demand: 1. When the price of salt increases by 50% the quantity demanded falls by...

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