Methods of measuring price elasticity of demand
 Percentage method or proportional method or Formula Method.
 Point elasticity method or Geometric Method.
 Arc elasticity method.
 Total outlay method or Expenditure method.
Percentage change or proportional or formula method:
The price of rice rises by 10% and the demand for rice falls by 15%.
Ep = % âˆ† quantity / % âˆ† price
= 15/10
= 1.5
Point elasticity method:
S. No. 
Ep at different Point on the demand curve as seen in the figure above 
Ep = lower segment / upper segment 
Price elasticity 
1 
Ep at point C (exactly at the middle point of AB demand curve) 
CE/CA = 2/2 = 1 
therefore Ep = 1 
2 
Ep at point D (middle point of CE portion of demand curve) 
DE/DA = 1/3 = 0.33 
therefore Ep < 1 
3 
Ep at point B (middle point of AC portion of demand curve) 
BE/AB = 3/1 = 3 
therefore Ep > 1 
4 
Ep at point E (bottom of the demand curve) 
O/AE= 0/4 = 0 (zero by anything is zero, a mathematical principle) 
therefore Ep = 0 
5 
Ep at point A (top of the demand curve) 
AE/O = 4/0 = âˆž (Anything by zero becomes infinity, a mathematical principle) 
therefore Ep = âˆž 
Arc elasticity of demand:
Note: If the problem is silent about the method to calculate price elasticity, then Arc method should be used.
P1 = 50, Q1 = 10
P2 = 30 , Q2 = 17
So, by using the formula,
Ep = 1017/10+17 x 50 + 30/50 â€“ 30
= 7/17 x 80/20 = 1.65
So, Ep = 1.65 so it is relatively elastic.
Total outlay method
 If demand is elastic, total outlay or expenditure increases for a fall in price and decreases with rise in price
 If demand is inelastic, total outlay or expenditure falls for a fall in price and rise with rise in price
 If elasticity of demand is unitary, total expenditure does not change for a fall or rise in price
Changes in price 
Types of elasticity of demand 

ep = 1 
ep < 1 
ep > 1 

Fall in price 
Total outlay remains constant 
Total outlay falls 
Total outlay rises 
Rise in price 
Total outlay remains constant 
Total outlay rises 
Total outlay falls 
Price of pen (P) (â‚¹) 
Quantity demanded (Q) 
Total outlay (PxQ) 
Elasticity of demand (e) 
5 
2,000 
10,000 
>1 Relatively elastic 
4 
3,000 
12,000 

2 
7,000 
16,000 

5 
2,000 
10,000 
=1 Unitary Elastic 
4 
2,500 
10,000 

2 
5,000 
10,000 

5 
2,000 
10,000 
=1 Unitary Elastic 
4 
2,250 
9,000 

2 
3,100 
6,200 