# 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