Home Page                      Contact Us                      About Us                      Privacy Policy                       Terms of Use                      Advertise 

Home Elasticity of Demand Meaning of Price Elasticity of Demand


Meaning of Price Elasticity of Demand:


The law of demand is straight forward. It tells us when the price of a good rises, its quantity demanded will fall, all other things held constant. The law dose not indicate as to how much the quantity demanded will fall with the rise in price or how much responsive demand is to a rise price. The economists here use and measure the quantity demanded to a change in price by the concept of elasticity of demand.


What is Price Elasticity of Demand?




Price elasticity of demand measures the degree of responsiveness of the quantity demanded of a good to a change in its price. It is also defined as:


"The ratio of proportionate change in quantity demanded caused by a given proportionate change in price".


Formula For Calculation:


Price elasticity of demand is computed by dividing the percentage change in quantity demanded of a good by the percentage change in its price.


Symbolically price elasticity of demand is expressed as under:


EdPercentage Change in Quantity Demanded

 Percentage Change in Price


Simple formula for calculating the price elasticity of demand:


 Ed    =     %∆Q





Ed stands for price elasticity of demand.


Q stands for original quantity.


P stands for original price.


∆ stands for a small change.




The price elasticity of demand tells us the relative amount by which the quantity demanded will change in response to a change in the price of a particular good. For example, if there is a 10% rise in the price of a tea and it leads to reduction in its demanded by 20%, the price elasticity of demand will be:


Ed = -20



Ed = -2.0

Relevant Articles:

Meaning of Price Elasticity of Demand
Degrees of Elasticity of Demand
Measurement of Price Elasticity of Demand
Types of Elasticity of Demand
Factors Determining Price Elasticity of Demand
Importance of Elasticity of Demand

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

                   Home Page                Contact Us                About Us                Privacy Policy                Terms of Use                Advertise               

All the material on this site is the property of economicsconcepts.com. No part of this website may be reproduced without permission of economics concepts.
All rights reserved Copyright
2010 - 2015