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Questions
State the formula for calculating the price elasticity of demand using the percentage method.
How is the elasticity of demand measured according to percentage method?
Explain the percentage method of measuring price elasticity of demand.
Solution
Percentage method:
According to this method, the price-elasticity of demand is given by the ratio of percentage change in demand to percentage change in price i.e.
Ed = `("Percentage change in quantity demanded")/("Percentage change in price")`
If the value of this ratio is equal to one then the commodity will be unit elastic. If the value is less than one then the commodity will be inelastic and if it is more than one, then the commodity will be elastic.
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