Price Elasticity of Demand can be defined as the degree to which the effective desire for a commodity changes as the Price of that commodity varies. Generally, it has been observed that willingness to buy a certain commodity changes as those things become more expensive. The Price change of a commodity also affects its Demand.
We can find the Elasticity of Demand, or the responsive degree of Demand by comparing the percentage of change in Price with the quantity of the Demand of that commodity. In this article, we shall look at the concept of the Price of Elasticity of Demand.
The Formula for Price Elasticity of Demand
The Price Elasticity of Demand can be defined as an economic measure of the change in the quantity demanded or purchased of the product concerning its Price change. Mathematically, the Price Elasticity of the Demand formula can be explained as:
The Price Elasticity of Demand formula is = [frac{text{% Change in Quantity Demanded}}{text{% Change in Price}}]
The cross-Price Elasticity of Demand is also an economic concept that measures the responsiveness in quantity demanded of one good when the Price for other good changes. This measurement is calculated by taking the percentage change in the quantity demanded of a particular good divided by the percentage change in the Price of the other good.
To calculate the Price Elasticity of Demand , we divide the change in quantity by initial quantity to calculate a percentage. If there is a Price rise from 50 to 70, we divide 20/50 = 0.4 = 40%.