PED - formula
Price elasticity of demand is calculated as:
Where Qd = Quantity demanded
and P = Price
The % change in quantity demanded is divided by the % change in price.
Some students find it difficult to remember which way up this equation is. The following 'aide memoire' may be of use. You usually put your dinner (demand) on your plate (price). Demand is over price, D over P!
Price elasticity is negative because price and quantity demanded usually vary inversely with each other. This is so common that the sign is ignored. Do not forget, when price increases, demand falls and vice versa. If necessary, go back and review the section relating to the law of demand.