Economics, 3rd Edition

Price elasticity of demand

=

%

ΔQd

%

ΔP

To calculate the percentage change in quantity demanded and the percentage change in price we use the 

following formulas:

Percentage change in quantity demanded

=

ΔQd

Qd

× 100

And

Percentage change in price

= ΔP

P

× 100

We can substitute these two formulas into our elasticity formula to get:

Price elasticity of demand

=

ΔQd

Qd

 / ΔP

P

This can in turn be re-arranged to give:

 

Price elasticity of demand

= P

Qd

×

ΔQd

ΔP

 

(1)

The slope of the demand curve is given by:

Slope

= ΔP

ΔQd

---

76  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

The ratio 

ΔQd

ΔP

 is the reciprocal of the slope of the demand curve. So the formula for the price elasticity 

of demand can also be written as: