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### How do you calculate Price Elasticity of Demand

Price Elasticity of Demand (PED) calculates the responsiveness/sensitivity of the quantity demanded of a good or service to a change in price.

The calculation for PED is therefore: the percentage change in quantity demanded divided by the percentage change in price.

If the resulting number is between 0 and 1, demand is inelastic, in other words it doesn't respond proportionally to a change in price. Inelastic goods often lack obvious substitute goods. Examples include petrol or salt.

If the resulting number is 1 or above then demand is elastic, in other words it responds more than proportionately to a change in price. Elastic goods often have clear substitutes or are non-essential. For example electronics such as TV's and phones could be described as having an elastic PED.

3 years ago

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