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This means that, along the demand curve between point B and A, if the price changes by 1%, the quantity demanded will change by 0.45%. A change in the price will result in a smaller percentage change in the quantity demanded. For example, a 10% increase in the price will result in only a 4.5% decrease in quantity demanded. A 10% decrease in the price will result in only a 4.5% increase in the quantity demanded. Price elasticities of demand are negative numbers indicating that the demand curve is downward sloping, but are read as absolute values. The following Work It Out feature will walk you through calculating the price elasticity of demand.

Finding the price elasticity of demand

Calculate the price elasticity of demand using the data in [link] for an increase in price from G to H. Has the elasticity increased or decreased?

Step 1. We know that:

Price Elasticity of Demand = % change in quantity % change in price

Step 2. From the Midpoint Formula we know that:

change in quantity = Q 2 Q 1 ( Q 2 + Q 1 )/2  × 100 change in price = P 2 P 1 ( P 2 + P 1 )/2  × 100

Step 3. So we can use the values provided in the figure in each equation:

% change in quantity = 1,600 1,800 ( 1,600 + 1,800 )/2  ×  100 = –200 1,700  ×  100 = –11 . 76 % change in price = 130 120 ( 130 + 120 )/2  ×  100 = 10 125  ×  100 = 8 . 0

Step 4. Then, those values can be used to determine the price elasticity of demand:

Price Elasticity of Demand = % change in quantity % change in price = –11.76 8 = 1.47

Therefore, the elasticity of demand from G to H 1.47. The magnitude of the elasticity has increased (in absolute value) as we moved up along the demand curve    from points A to B. Recall that the elasticity between these two points was 0.45. Demand was inelastic between points A and B and elastic between points G and H. This shows us that price elasticity of demand changes at different points along a straight-line demand curve .

Calculating the price elasticity of supply

Assume that an apartment rents for $650 per month and at that price 10,000 units are rented as shown in [link] . When the price increases to $700 per month, 13,000 units are supplied into the market. By what percentage does apartment supply increase? What is the price sensitivity?

Price elasticity of supply

The graph shows an upward sloping line that represents the supply of apartment rentals.
The price elasticity of supply is calculated as the percentage change in quantity divided by the percentage change in price.

Using the Midpoint Method ,

% change in quantity = 13,000 10,000 ( 13,000 + 10,000 )/2  × 100 = 3,000 11,500  × 100 = 26.1 % change in price = $700 $600 ( $700 + $650 )/2  × 100 = 50 675  × 100 = 7.4 Price Elasticity of Supply = 26.1%   7.4% = 3.53

Again, as with the elasticity of demand, the elasticity of supply is not followed by any units. Elasticity is a ratio of one percentage change to another percentage change—nothing more—and is read as an absolute value. In this case, a 1% rise in price causes an increase in quantity supplied of 3.5%. The greater than one elasticity of supply means that the percentage change in quantity supplied will be greater than a one percent price change. If you're starting to wonder if the concept of slope fits into this calculation, read the following Clear It Up box.

Is the elasticity the slope?

It is a common mistake to confuse the slope of either the supply or demand curve with its elasticity. The slope is the rate of change in units along the curve, or the rise/run (change in y over the change in x). For example, in [link] , each point shown on the demand curve, price drops by $10 and the number of units demanded increases by 200. So the slope is –10/200 along the entire demand curve and does not change. The price elasticity, however, changes along the curve. Elasticity between points A and B was 0.45 and increased to 1.47 between points G and H. Elasticity is the percentage change, which is a different calculation from the slope and has a different meaning.

When we are at the upper end of a demand curve, where price is high and the quantity demanded is low, a small change in the quantity demanded, even in, say, one unit, is pretty big in percentage terms. A change in price of, say, a dollar, is going to be much less important in percentage terms than it would have been at the bottom of the demand curve. Likewise, at the bottom of the demand curve, that one unit change when the quantity demanded is high will be small as a percentage.

So, at one end of the demand curve, where we have a large percentage change in quantity demanded over a small percentage change in price, the elasticity value would be high, or demand would be relatively elastic. Even with the same change in the price and the same change in the quantity demanded, at the other end of the demand curve the quantity is much higher, and the price is much lower, so the percentage change in quantity demanded is smaller and the percentage change in price is much higher. That means at the bottom of the curve we'd have a small numerator over a large denominator, so the elasticity measure would be much lower, or inelastic.

As we move along the demand curve, the values for quantity and price go up or down, depending on which way we are moving, so the percentages for, say, a $1 difference in price or a one unit difference in quantity, will change as well, which means the ratios of those percentages will change.

Key concepts and summary

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded (or supplied) divided by the percentage change in price. Elasticity can be described as elastic (or very responsive), unit elastic, or inelastic (not very responsive). Elastic demand or supply curves indicate that quantity demanded or supplied respond to price changes in a greater than proportional manner. An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied. A unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.


The equation for a demand curve is P = 48 – 3Q. What is the elasticity in moving from a quantity of 5 to a quantity of 6?

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The equation for a demand curve is P = 2/Q. What is the elasticity of demand as price falls from 5 to 4? What is the elasticity of demand as the price falls from 9 to 8? Would you expect these answers to be the same?

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The equation for a supply curve is 4P = Q. What is the elasticity of supply as price rises from 3 to 4? What is the elasticity of supply as the price rises from 7 to 8? Would you expect these answers to be the same?

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The equation for a supply curve is P = 3Q – 8. What is the elasticity in moving from a price of 4 to a price of 7?

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Questions & Answers

what is production
Imoro Reply
what is a monopolistic competition?
moniman Reply
who is barter
Tening Reply
exchange goods each other
what is economic
is the use of scares resources to satisfy our unlimited needs and wants
how many kinds of utility functions?
What is partnership?
the legal association of two or more people as co-owners of a business for profit.
Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product?
James Reply
what is supply
Mizta Reply
what is opportunity cost
The opportunity gained interms of opportunity lost is known as opportunity cost Or The second best alternative use of resources
forgone alternative: like forgoing Something our of two to buy one
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Addo Reply
macroeconomics is the study of economic as a whole level.
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Sumit Reply
positive science it is focused on facts and cause and effect and behavioural relationship and include developmental testing in economic theoreis.
what is inflation
Sama Reply
inflation is the general price increase of goods and services in an economy.
Inflation is the persistent rise in the general price level
inflation is characterized by increase in the general price of goods and services. when there is too much money in circulation. increase in demand of goods pursuing fewer goods. when purchasing power of money decreases .
inflation is the persistent rise general price level
inflation is the persistent increase in price
how are you
increase in the general level of price...
what is deflation
is the gradual decrease of currency exchange in a country.
why ecnomics important ? give answer plz
Because is a field of science study that reflects on our day to day activities with human behavior.
why economic is a science
Economics is referred to as a social science not a pure science. It's regarded as a social science because it makes use of the scientific method to solve problems. The scientific method refers to observation, asking questions, forming hypothesis, experimentation etc
Economics is a social science because it study human behavior how he relates with his daily activities with the available limited resources to satisfy his wants.
what are the factors affecting the demand
yeah it uses the scientific method to study human behaviour.
inflation referes to the persistant increase in the general price of goods and services over a given period of time say a year.
factors affacting Demand of good and services are 1.price of a commodity in question 2.price of related commodity 3.Income of a consumer 4.Population 5.tast and prefereance 6.Season or weather condition
what is difference between perfect and non perfect market.
what the difference between Trade off and Opportunity Cost?
In trade off, you increase the amount of something by decreasing the amount of something else. For example, you use 2 hours to study and 2 hours for leisure. if you increase study hour by 1 more hour, i.e 3 hours, leisure time will decrease by 1 hour, i.e 1 hour.
In all, you would have traded off 1 hour of leisure time for 3 hours of study time. But in opportunity cost, you let something go in order to obtain something else entirely.
thanks for your idea
different between demand and quantity demand
Farhan Reply
No difference
demand is the overall demand for it
actually theres no difference
quantity demanded is used in Equilibrium of d and s
for evrything else u use deman
the difference of it is that when demand simply denotes the willingness and a person's ability to purchase. And as against quantity demand represent the amount of an economic good or services desire by a consumer at a fixed price .☺
how to calculate inflation
Richard Reply
Explain the factors that have led to high quantity demanded
Ogwang Reply
price of the product increase of price substitute product as people shift to cheap one
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Black Reply
the size of the commodity
increase demand of labour decrease supply of labour
I do support your answer Jackel.
but how do they do it?
by increasing more labour and reduced the suppliers
they can not increase labour, they increase demand of labour.
how do they increase demand for labor?
by analyzing the market equilibrium , cost reduction and cost control , savings in time .
decreasing supply of labour are achieved through training and certification that require for you to employed, you must have certificate, also trade union encouraged government to restrict migration into the country causing shortage of labour supply. Note that the aim of union is to enhance life
objective of union: better working conditions, liveable wage, protect member from unfair treatment which are done through negotiations betweens representative and management. known as collective bargaining.
what is the nature of economics?
Tyscar Reply
economics is a social science since it seeks to solve social problem of scarcity
main concerns is the decision individuals make on the allocation of scarce resources among the competing wants
in the short run firm produce a positive as long as the price is larger than what?
yoel Reply
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Bah Reply
economics is the study of managing the resources in order to maximize the needs and satisfy the wants to a great extent in a regulated set-up..
One explanation for deviation when there is no impact on balance of trade
economic s is a social science that deals with human behavior as a relationship between ends and scarce means which has alternative uses
economic is a study of mankind in ordinary business of life
economics it is the study of social science that deals with human behaviour as relationship between ends and scarce means which have alternative uses
Economic is the use of scarce recourses to attain economic dough effectively and efficiently.
economics is the study of how humans make decisions in the face of scarcity. Eg. family decision, individual decision, and societal decision.

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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