Elastic Demand:

The demand for a commodity is said to be elastic when the price elasticity of demand coefficient (without the negative sign) is greater than one (1). This means the change in price causes a complaratively larger change in quantity demanded or the percentage change in price is less tahn the percentage change in quantity.

Example

A 10 percent increase in the price of a product led to a 25 percent decline in the quantity demanded. Calculate the own price eleasticity of demand and interpret your answer.

Solution

Since PED without the negative sign of 2.50 is greater that 1, demand for the product is elastic.