and
(46-2) % change in price = × 100
In Figure 46.1, we see that when the price rises from $20 to $21, the quantity demanded
falls from 10 million to 9.9 million vaccinations, yielding a change in the quantity de-
manded of 0.1 million vaccinations. So the percent change in the quantity demanded is
% change in quantity demanded =× 100 = −1%
The initial price is $20 and the change in the price is $1, so the percent change in the price is
% change in price =× 100 = 5%
To calculate the price elasticity of demand, we find the ratio of the percent change in
the quantity demanded to the percent change in the price:
(46-3) Price elasticity of demand =
In Figure 46.1, the price elasticity of demand is therefore
Price elasticity of demand == 0.2
Thelaw of demandsays that demand curves slope downward, so price and quantity de-
manded always move in opposite directions. In other words, a positive percent change in
price (a rise in price) leads to a negative percent change in the quantity demanded; a nega-
tive percent change in price (a fall in price) leads to a positive percent change in the quan-
tity demanded. This means that the price elasticity of demand is, in strictly mathematical
terms, a negative number. However, it is inconvenient to repeatedly write a minus sign. So
1%
5%
Change in price
Initial price
$1
$20
−0.1 million vaccinations
10 million vaccinations
% change in quantity demanded
% change in price
module 46 Income Effects, Substitution Effects, and Elasticity 461
Section 9 Behind the Demand Curve: Consumer Choice
figure 46.1
The Demand for Vaccinations
At a price of $20 per vaccination, the quantity
of vaccinations demanded is 10 million per
year (point A). When price rises to $21 per vac-
cination, the quantity demanded falls to 9.9
million vaccinations per year (point B).
D
10.09.9
$21
20
Price of
vaccination
A
0 Quantity of vaccinations
(millions)