The price elasticity of demand (which is often shortened to demand elasticity) is defined to be the percentage change in quantity demanded, q, divided by the percentage change in price, p. The formula for the demand elasticity (ǫ) is: ǫ = p q dq dp .

How are elasticities calculated?

Key points. Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded—or supplied—divided by the percentage change in price.

What is the formula for calculating demand?

In its standard form a linear demand equation is Q = a - bP. That is, quantity demanded is a function of price. The inverse demand equation, or price equation, treats price as a function f of quantity demanded: P = f(Q).