Suppose that the price of a commodity increases from Rs. 90 to Rs. 110 and the demand curve shows that the corresponding reduction in antity demanded is from 240 units to 160 units. Then, the coefficient of the price elasticity of demand will be

The price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price. To calculate the coefficient, we use the midpoint (arc) elasticity formula, which is preferred as it provides a consistent value regardless of the direction of change. The formula is: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Given P1 = 90, P2 = 110, Q1 = 240, and Q2 = 160, the percentage change in quantity is (160 - 240) / 200 = -0.4 (or -40%). The percentage change in price is (110 - 90) / 100 = 0.2 (or 20%). Dividing the percentage change in quantity (-0.4) by the percentage change in price (0.2) yields a coefficient of -2.0. In economics, the absolute value is typically reported, resulting in a coefficient of 2.0.

Sources

1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.6.3 Elasticity and Expenditure > p. 34