Be able to calculate price, income and cross elasticities of demand
Elasticity calculations measure how strongly demand reacts to a change. Each of the three types uses the same basic structure: percentage change in quantity demanded divided by the thing that changed.
Formula
PED = %ΔQd ÷ %ΔP | YED = %ΔQd ÷ %ΔY | XED = %ΔQd(A) ÷ %ΔP(B)
Real World
If BP raises petrol prices by 5% and UK drivers reduce quantity demanded by just 2%, PED = −0.4, confirming petrol is price inelastic — drivers have few short-run alternatives.
Exam Focus
Show your working in two clear steps — calculate each percentage change first, then divide — to secure method marks even if the final answer is wrong.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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