Price Elasticity of Demand (PED)

$\text{PED} = \dfrac{\%\,\Delta\,Q_d}{\%\,\Delta\,P}$

That is, PED is the percentage change in quantity demanded divided by the percentage change in price. Both numbers are percentages, not raw unit changes.

To work out either percentage change:

$\% \,\text{change} = \dfrac{\text{new value} - \text{old value}}{\text{old value}} \times 100$

A short illustration before the full template. The price of a takeaway pizza rises from £8 to £10, and quantity demanded falls from 200 to 150 per evening.

• %ΔP = (10 − 8) ÷ 8 × 100 = +25 %
• %ΔQd = (150 − 200) ÷ 200 × 100 = −25 %
• PED = −25 ÷ 25 = −1

The PED value for a normal good is always negative (price and quantity move in opposite directions). Examiners often expect the absolute value and accept either −1 or 1 as long as the candidate explains the sign convention. Mark schemes typically use the absolute value, so this set of notes does the same unless otherwise stated.