Price elasticity of demand

In economics, the price elasticity of demand (PED or Ed) is a measure to show the responsiveness (or elasticity) of the quantity demanded for a good or service to a change in its price, ceteris paribus. It is also known as the percentage change in quantity demanded for a good or service for a percentage change in the price of the same good or service. In short, the price elasticity of demand is given by the following formula:
formula_1
As the price and the quantity demanded of a good are inversely related (i.e. an increase in price will always cause a decrease in quantity demanded and vice versa), the sign of PED is always negative. Hence, economists tend to just ignore the sign and compare the absolute values instead.
In absolute terms, if the percentage change in the price is more than proportionate than the percentage change in the quantity demanded, the elasticity value is greater than one and the demand for the good is price elastic. Likewise, if the percentage change in the price is less than proportionate than the percentage change in the quantity demanded, the elasticity value is smaller than one and the demand for the good is price inelastic.
In diagrams, the price elasticity of demand is shown by the gradient of the demand curve. A steeper curve refers to a more price inelastic demand whereas a gentler curve refers to a more price elastic demand.
Factors affecting price elasticity of demand.
Factors that affect the price elasticity of demand for a good include: