2.2.2—Elasticity formulae

PED = % change in quantity demanded / % change in price; YED = % change in quantity demanded / % change in income; XED = % change in demand for A / % change in price of B.

Use a consistent percentage-change method, state the sign and interpret the magnitude. For a finite interval, the midpoint method may avoid choosing one endpoint as the base.

If price rises 10% and quantity demanded falls 20%, PED = −2. A 5% income rise that increases demand 2% gives YED = 0.4.

Do not divide an absolute quantity change by a percentage price change; both parts must be percentage changes.