Who this is for: Cambridge IGCSE Economics (0455) students who want price elasticity of demand (PED) — the formula, elastic vs inelastic demand, and business implications — to become a reliable source of marks instead of a calculation they memorise without understanding.
What query it owns: how to understand and revise price elasticity of demand in Cambridge IGCSE Economics.
Why this is safe: this page owns the PED revision-guide angle, while Tutopiya’s Price Elasticity of Demand subtopic page owns the learning resource and the free Price Elasticity of Demand quiz owns the practice.

Price elasticity of demand (PED) measures how responsive quantity demanded is to a change in price. Cambridge IGCSE Economics (0455) expects you to calculate PED, classify demand as elastic, inelastic or unit elastic, and explain the determinants and business implications of different elasticity values. This guide links each PED result to the explanation and calculation questions examiners set.

Key takeaways

• PED = % change in quantity demanded ÷ % change in price.
• Elastic demand (PED > 1): quantity demanded changes proportionally more than price.
• Inelastic demand (PED < 1): quantity demanded changes proportionally less than price.
• Unit elastic (PED = 1): proportional change in quantity demanded and price.
• PED is usually negative (law of demand); Cambridge often uses the absolute value for classification.

What is price elasticity of demand in Cambridge IGCSE Economics?

Price elasticity of demand measures the responsiveness of quantity demanded to a change in the price of the good itself. Cambridge IGCSE Economics (0455) tests whether you can apply the percentage formula, interpret the result, and explain why some goods (luxuries, goods with substitutes) are more price-elastic than others (necessities, addictive goods).

You can read the full explanation, worked examples and notes on Tutopiya’s Price Elasticity of Demand subtopic page before you attempt questions.

Core PED definitions you must know

Term	Definition	PED value
Price elastic demand	Qd responds more than proportionally to price change	|PED| > 1
Price inelastic demand	Qd responds less than proportionally to price change	|PED| < 1
Unit elastic demand	Qd responds proportionally to price change	|PED| = 1
Perfectly inelastic	Qd does not change when price changes	PED = 0
Perfectly elastic	Any price rise causes Qd to fall to zero	PED = ∞

How to calculate PED — step by step

1. Write the formula: PED = % ΔQd ÷ % ΔP.
2. Calculate % change in quantity demanded from the data given.
3. Calculate % change in price from the data given.
4. Divide to get PED (expect a negative value).
5. Take the absolute value to classify: > 1 elastic, < 1 inelastic, = 1 unit elastic.
6. Interpret — what does this mean for total revenue or business pricing?

Test yourself with the free Price Elasticity of Demand quiz once you can calculate and classify PED confidently.

Determinants of PED: what makes demand more elastic?

Determinant	More elastic (higher |PED|)	More inelastic (lower |PED|)
Availability of substitutes	Many close substitutes	Few or no substitutes
Necessity vs luxury	Luxury good	Necessity
Proportion of income	Large share of income	Small share of income
Time period	Long run (time to adjust)	Short run
Addictiveness	Non-addictive	Addictive (e.g. cigarettes)

PED and total revenue

Demand type	Price rises →	Price falls →
Elastic (|PED| > 1)	Total revenue falls	Total revenue rises
Inelastic (|PED| < 1)	Total revenue rises	Total revenue falls
Unit elastic (|PED| = 1)	Total revenue unchanged	Total revenue unchanged

PED in past-paper wording: command words that matter

Command word / phrase	What the question wants	Typical PED stem
Define	Precise meaning	”Define price elasticity of demand.”
Calculate	Apply the formula	”Calculate the price elasticity of demand.”
Explain	Cause and effect	”Explain why the demand for salt is price inelastic.”
Distinguish between	Compare two types	”Distinguish between price elastic and price inelastic demand.”
Discuss	Consider both sides	”Discuss whether a firm should raise its price.”

Worked exam-style stems (how to answer the wording)

1. “Define price elasticity of demand.” Price elasticity of demand measures the responsiveness of quantity demanded to a change in the price of the good itself. Mark-scheme reward: responsiveness + quantity demanded + change in price.
2. “Price rises from $10 to $12. Quantity demanded falls from 100 to 80. Calculate PED.” % ΔQd = (80−100)/100 × 100 = −20%. % ΔP = (12−10)/10 × 100 = +20%. PED = −20/20 = −1 (unit elastic). Reward: correct method and answer.
3. “Explain why demand for petrol may be price inelastic in the short run.” Few close substitutes for car travel in the short run; petrol is needed for commuting; it may be a small proportion of income for some drivers. Reward: at least two valid determinants linked to inelastic demand.

How PED connects to the rest of Cambridge IGCSE Economics

PED builds on Demand and pairs with Price Elasticity of Supply. The Cambridge IGCSE Economics resource hub links every Allocation of Resources subtopic.

Common mistakes students make

• Forgetting PED is usually negative and misclassifying the result.
• Confusing elastic (responsive) with inelastic (unresponsive).
• Using absolute change instead of percentage change in the formula.
• Saying total revenue rises when price rises for elastic demand (it falls).
• Mixing up PED with income elasticity or cross elasticity.

When you need more support

If PED calculations keep costing marks, work through the Price Elasticity of Demand quiz, then get focused help from a Cambridge IGCSE Economics tutor.

Frequently asked questions

Is PED hard in Cambridge IGCSE Economics? The formula is straightforward. Marks are lost on percentage calculations and misinterpreting elastic vs inelastic.

What is the PED formula? PED = percentage change in quantity demanded ÷ percentage change in price.

When is demand price elastic? When the absolute value of PED is greater than 1 — quantity demanded changes by a larger percentage than price.

How do I revise price elasticity of demand effectively? Practise calculations, learn determinants, link PED to total revenue, then take the Price Elasticity of Demand quiz.

Ready to master Cambridge IGCSE Economics price elasticity of demand?

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