When the price of a good falls from 10 to 8 and quantity rises from 50 to 60 units, I don't know how to find the elasticity and what the answer means.
Price elasticity of demand measures how responsive quantity demanded is to a change in price. The percentage method formula is: Ed = (percentage change in quantity demanded) divided by (percentage change in price). First find the percentage change in quantity: (60 minus 50) / 50 into 100 = 20 percent. Then the percentage change in price: (8 minus 10) / 10 into 100 = minus 20 percent. So Ed = 20 / minus 20 = minus 1, and we take the numerical value as 1. Since elasticity equals 1, demand is unitary elastic, meaning quantity changes in exactly the same proportion as price. If the value is greater than 1, demand is elastic; if less than 1, it is inelastic. We usually ignore the minus sign because the law of demand always gives an inverse price-quantity relationship.
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