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Intermediate · 3 min

How strongly buyers respond

Price elasticity of demand compares the percentage change in quantity demanded with the percentage change in price. Demand is more responsive when suitable substitutes are available and buyers have time to adjust. Elasticity differs across products and circumstances; it is not just the slope read from any graph.

Practice

A 10% price increase causes a 20% quantity decrease in an example. What is the elasticity magnitude?