Key terms
- Price elasticity of demand
- The price elasticity of demand is the percentage change in the quantity demanded of a good divided by the percentage change in its price.
- Slope
- The slope is the rate of change in units along the curve, the change in price over the change in quantity.
The answer is a ratio of two percentages, so it has no units
Elasticity is a ratio of one percentage change to another, nothing more, so no units follow it. An elasticity of 0.45 says that a one per cent change in price brings a 0.45 per cent change in quantity demanded. Because price and quantity demanded move in opposite directions, the answer always comes out negative, and by convention it is read as its size, without the sign.