Economics · Ch 4 — Elasticity of Demand

Measuring Price Elasticity — Percentage (Proportionate) Method

The Maharashtra HSC syllabus studies four methods of actually measuring price elasticity of demand from data. The first and most direct is the Percentage Method (also called the Proportionate Method), which applies the basic formula directly to a single before-and-after change in price and quantity.

Note

Percentage Method

$E_d = \dfrac{\%\Delta Q}{\%\Delta P} = \dfrac{\dfrac{\Delta Q}{Q}\times100}{\dfrac{\Delta P}{P}\times100} = \dfrac{\Delta Q}{\Delta P}\times\dfrac{P}{Q}$

where $P$ and $Q$ are the ORIGINAL price and quantity demanded, and $\Delta P$ , $\Delta Q$ are the changes in price and quantity respectively (ignore the negative sign in the final answer). …

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