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Price Elasticity of Demand

SFBy Sitraka Forler · Lecturer, Durham Business School·Updated 13 September 2026· About this site

How responsive quantity demanded is to a change in price.

PED is the percentage change in quantity divided by the percentage change in price. |PED| > 1 is elastic (luxuries), < 1 is inelastic (necessities like fuel). Firms use it to decide whether a price cut will raise or lower total revenue.

PED = (%ΔQ) / (%ΔP)
Elastic if |PED| > 1, inelastic if |PED| < 1

# midpoint (arc) elasticity between two points
ped = ((q2 - q1) / ((q1 + q2) / 2)) / ((p2 - p1) / ((p1 + p2) / 2))

# from a demand series
ped = demand.pct_change() / price.pct_change()

SELECT ((q2 - q1) / ((q1 + q2) / 2.0))
     / ((p2 - p1) / ((p1 + p2) / 2.0)) AS price_elasticity
FROM demand_curve;