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Price Elasticity of Demand: Types, Factors (ICSE 10)

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EconomicsICSE Class 10 · Elasticity of Demand and Supply

Price Elasticity of Demand: Meaning, Percentage Method, Types and Factors (ICSE Class 10)

Updated 17 October 2026 · Fact-checked

Price elasticity of demand is the degree of responsiveness of the quantity demanded of a commodity to a change in its price. By the percentage method, Ed = percentage change in quantity demanded ÷ percentage change in price (taken as a positive number). Demand is elastic if Ed > 1, unitary if Ed = 1, inelastic if Ed < 1, perfectly elastic if Ed is infinite and perfectly inelastic if Ed = 0.

Understand Price Elasticity of Demand: Types and Factors

Meaning. The law of demand says which way quantity moves; elasticity says how much it moves.

Percentage method.
Ed = (% change in quantity demanded) ÷ (% change in price), where % change = (change ÷ original) × 100. The sign is ignored, so Ed is quoted as a positive value. The syllabus tells us that numerical problems are not for testing, but you must understand the method.

Degrees of elasticity of demand.
1. Perfectly elastic (Ed = ∞): a very slight price change causes an infinite change in quantity; horizontal demand curve.
2. Perfectly inelastic (Ed = 0): quantity does not change at all when price changes; vertical curve.
3. Elastic or relatively elastic (Ed > 1): quantity changes by a larger percentage than price; flatter curve.
4. Inelastic or relatively inelastic (Ed < 1): quantity changes by a smaller percentage than price; steeper curve.
5. Unitary elastic (Ed = 1): both change by the same percentage.

Factors affecting elasticity of demand.
1. Nature of the commodity: necessities (salt, medicines) have inelastic demand; luxuries (jewellery, cars) have elastic demand.
2. Availability of substitutes: many close substitutes make demand elastic.
3. Proportion of income spent: items that take a small part of income (a box of matches) are inelastic.
4. Habits: addictive or habitual goods are inelastic.
5. Time period: demand is more elastic in the long run.
6. Number of uses: goods with many uses are more elastic.
7. Postponement: goods whose purchase can be delayed have elastic demand.

Price Elasticity of Demand: Types and Factors: key facts

Ed (percentage method)
Ed = % change in quantity demanded ÷ % change in price
% change
(New − Old) ÷ Old × 100
Degrees
  • Ed = ∞ perfectly elastic
  • Ed > 1 elastic
  • Ed = 1 unitary
  • Ed < 1 inelastic
  • Ed = 0 perfectly inelastic
Curves
Perfectly elastichorizontal
Perfectly inelasticvertical
Othersdownward sloping

How to answer Price Elasticity of Demand: Types and Factors questions

Compute the two percentage changes from the original values, divide, and compare with 1.

  1. 1Percentage change in quantity = (Q1 − Q0) ÷ Q0 × 100.
  2. 2Percentage change in price = (P1 − P0) ÷ P0 × 100.
  3. 3Ed = quantity % ÷ price %, ignoring signs.
  4. 4Compare with 1 and name the degree.
  5. 5Re-check both percentages, since a slip in one changes the result.

Price Elasticity of Demand: Types and Factors in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Salt and ice cream

Suppose the price of salt rises from ₹20 to ₹24 per kg, and a family cuts its purchase from 10 kg to 9.5 kg a year. When the price of a cup of ice cream rises from ₹40 to ₹48, the family cuts from 10 cups to 6 cups.

Find Ed for each and say which is a necessity.

Try it first, then show the solutionSolution
  1. Salt: price change = 4 ÷ 20 × 100 = 20%; quantity change = 0.5 ÷ 10 × 100 = 5%; Ed = 5 ÷ 20 = 0.25 (inelastic).
  2. Ice cream: price change = 8 ÷ 40 × 100 = 20%; quantity change = 4 ÷ 10 × 100 = 40%; Ed = 40 ÷ 20 = 2 (elastic).
  3. Salt is the necessity (inelastic).

Answer: Ed (salt) = 0.25, inelastic; Ed (ice cream) = 2, elastic.

Memory hook: Needs are stubborn; luxuries are touchy.

Tricks to remember Price Elasticity of Demand: Types and Factors

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Greater than one stretches

    Ed > 1 is elastic (quantity stretches more).

    Use it when: Classification.

  • Horizontal = infinite, vertical = zero

    Flat line is perfectly elastic; upright line is perfectly inelastic.

    Use it when: Curves.

  • NSPHT

    Nature, Substitutes, Proportion of income, Habit, Time.

    Use it when: Factors.

Price Elasticity of Demand: Types and Factors: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Perfectly inelastic · 1 mark · MCQBoard level

The demand curve for a perfectly inelastic good is:
(a) horizontal
(b) vertical
(c) upward sloping
(d) a rectangular hyperbola

Try it first, then show the solutionSolution
  1. Quantity does not change, so the line is vertical.

Answer: (b)

Example 2: Compute Ed · 2 marks · Short answerBoard level

When the price of a good falls from ₹50 to ₹40, quantity demanded rises from 100 to 130 units. Find Ed. (2 marks)

Try it first, then show the solutionSolution
  1. % change in price = 10 ÷ 50 × 100 = 20%.
  2. % change in quantity = 30 ÷ 100 × 100 = 30%.
  3. Ed = 30 ÷ 20 = 1.5. Check: 1.5 × 20 = 30.

Answer: Ed = 1.5, elastic demand.

Example 3: Inelastic case · 3 marks · Short answerHarder board level

Price of a medicine rises from ₹100 to ₹125 and quantity demanded falls from 400 to 380 units. Find Ed and name the degree. (3 marks)

Try it first, then show the solutionSolution
  1. % change in price = 25 ÷ 100 × 100 = 25%.
  2. % change in quantity = 20 ÷ 400 × 100 = 5%.
  3. Ed = 5 ÷ 25 = 0.2, less than 1, so demand is inelastic.

Answer: Ed = 0.2; inelastic.

Example 4: Factors · 4 marks · Long answerHarder board level

Explain any four factors that affect the elasticity of demand with examples. (4 marks)

Try it first, then show the solutionSolution
  1. Nature of the good: salt (necessity) is inelastic; jewellery is elastic.
  2. Substitutes: demand for one brand of soap is elastic because other brands exist.
  3. Proportion of income: matchbox is a negligible part of income, so inelastic.
  4. Time: given more time, buyers find alternatives, so demand becomes more elastic.

Answer: Nature, substitutes, proportion of income and time, with examples.

Example 5: Revenue and elasticity · 3 marks · Short answerHOTS / competency

A seller raises the price of an item from ₹10 to ₹12 and sales fall from 200 to 190 units. Find Ed, and compare total revenue before and after. Is the seller better off? (3 marks)

Try it first, then show the solutionSolution
  1. Price change = 2 ÷ 10 × 100 = 20%; quantity change = 10 ÷ 200 × 100 = 5%; Ed = 0.25 (inelastic).
  2. Revenue before = 10 × 200 = ₹2,000; after = 12 × 190 = ₹2,280.
  3. Revenue rises by ₹280, as demand is inelastic; the seller is better off.

Answer: Ed = 0.25; revenue rises from ₹2,000 to ₹2,280.

Where students lose marks in Price Elasticity of Demand: Types and Factors

The slips examiners see most often, and what to write instead.

  • Mistake: Using new value as the base

    Wrong base.

    Wrong working

    % change = 10 ÷ 40 for a fall from 50 to 40.

    Right working

    % change = 10 ÷ 50 × 100 = 20%.

    Do this: Always divide by the original.

    Usually costs: 1 mark.

  • Mistake: Dividing price by quantity

    Formula inverted.

    Wrong working

    Ed = 20 ÷ 30.

    Right working

    Ed = 30 ÷ 20 = 1.5.

    Do this: Quantity on top.

    Usually costs: 1 mark.

  • Mistake: Mixing curve shapes

    Both extreme cases.

    Wrong working

    Horizontal line is perfectly inelastic.

    Right working

    Horizontal = perfectly elastic; vertical = perfectly inelastic.

    Do this: Draw them once and memorise.

    Usually costs: 1 mark.

Exam tips

  • Put quantity percentage on top and price percentage below.
  • Draw all five curves for 5-mark questions, labelled with Ed.
  • The syllabus says numericals are not tested; focus on meaning, degrees and factors.

Practice questions on Price Elasticity of Demand: Types and Factors

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    If a 10% fall in price leads to a 20% rise in quantity demanded, Ed equals:
    (a) 0.5
    (b) 1
    (c) 2
    (d) 30

    Hint

    20 ÷ 10.

    Answer

    (c)

  2. Q2 · 2 marks · Short answerBoard level

    What does price elasticity of demand measure? Write the formula used in the percentage method. (2 marks)

    Hint

    Responsiveness.

    Answer

    It is the responsiveness of quantity demanded to a change in price; Ed = percentage change in quantity demanded ÷ percentage change in price.

  3. Q3 · 3 marks · Short answerHarder board level

    Quantity demanded rises from 500 to 560 when price falls from ₹30 to ₹25. Find Ed and say whether demand is elastic or inelastic. (3 marks)

    Hint

    12% over 16.67%.

    Answer

    Quantity change = 60 ÷ 500 × 100 = 12%. Price change = 5 ÷ 30 × 100 = 16.67%. Ed = 12 ÷ 16.67 = 0.72 (about), so demand is inelastic.

  4. Q4 · 3 marks · Short answerHarder board level

    Distinguish between elastic demand and inelastic demand on any three bases. (3 marks)

    Hint

    Ed value, curve, goods.

    Answer

    Elastic: Ed > 1, flatter curve, luxuries. Inelastic: Ed < 1, steeper curve, necessities.

  5. Q5 · 3 marks · Short answerHOTS / competency

    The price of a good falls from ₹40 to ₹36 and Ed is 3. By what per cent does quantity demanded change, and what will be the new quantity if the original was 150 units? (3 marks)

    Hint

    Rearrange the formula.

    Answer

    Price change = 4 ÷ 40 × 100 = 10%. Quantity change = 3 × 10 = 30%. New quantity = 150 + 30% of 150 = 150 + 45 = 195 units.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Ed for a vertical curve?Show answer

    Zero.

  2. 2.Ed > 1 means?Show answer

    Elastic demand.

  3. 3.Percentage method formula?Show answer

    % change in Qd ÷ % change in price.

  4. 4.Elastic demand goods?Show answer

    Luxuries.

  5. 5.Why is time a factor?Show answer

    Buyers find substitutes in the long run.

Price Elasticity of Demand: Types and Factors: frequently asked questions

What is price elasticity of demand?

The responsiveness of quantity demanded to a change in price.

How is it measured in the syllabus?

By the percentage method.

What are the degrees of elasticity of demand?

Perfectly elastic, perfectly inelastic, elastic, inelastic and unitary elastic.