supplied (Qs) and the corresponding percent change in price. The price elasticity of demand is the percentage

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5.1 • Price Elasticity of Demand and Price Elasticity of Supply 113

change in the quantity demandedof a good or service divided by the percentage change in the price. The price

elasticity of supply is the percentage change in quantity supplieddivided by the percentage change in price.

We can usefully divide elasticities into three broad categories: elastic, inelastic, and unitary. Because price and

quantity demanded move in opposite directions, price elasticity of demand is always a negative number.

Therefore, price elasticity of demand is usually reported as its absolute value, without a negative sign. The

summary in Table 5.1 is assuming absolute values for price elasticity of demand. An elastic demand or elastic

supply is one in which the elasticity is greater than one, indicating a high responsiveness to changes in price.
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