Calculating Price Elasticities of Supply and Demand(PED)
(Step by Step Calculation)
Price Elasticity (PED or Ed) Calculator
Calculates the price elasticity of demand with Step by Step Explanation.
Price Elasticity of Supply and Demand(PED) Formula :
Price Elasticity (PED or Ed) = Percentage Change in Quantity / Percentage Change in Price
Where
Percentage Change in Price = ((New Price - Original Price) / Original Price) x 100
Percentage Change in Quantity = ((New Quantity - Original Quantity) / Original Quantity) x 100
Elasticity of demand is the percentage change in the quantity demanded that results from a given percentage change in the price.
The key to elasticity is that it is a unitless measure.The exact number of units of change does not matter.Instead, elasticity is the ratio of the percentage changes-percentage change in quantity divided by the percentage change in price. This ratio is always expressed as an absolute value.
Example
Let us take the simple example of petrol. Now let us assume that a surged of 60% in petrol price resulted in a decline in the purchase of petrol by 15%.
Price Elasticity of Demand (PED) Formula= Percentage change in quantity / Percentage change in price
Price Elasticity of Demand (PED) = -15% / 60%
Price Elasticity of Demand (PED)= -1/4 or -0.25