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What is the price elasticity of demand?

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Quick Answer

Investopedia defines price elasticity of demand as a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. The price elasticity of demand is equal to the percent change in quantity demanded divided by the percent change in price.

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Full Answer

In economics, if a small change in price is accompanied by a large change in the quantity demanded, then product demand is considered elastic. This means that demand is responsive to price changes. If a large price change, however, results in a small change in the quantity demanded, then demand is considered inelastic.

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