Briefly explain the percentage method of calculating elasticity of demand.

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Solution

If the percentage change in demand is proportional to percentage change in price, the elasticity is said to be unity. If the percentage change in demand is more than the percentage change in price, the elasticity is more than one, and if the percentage change in demand is less than percentage change in price, the elasticity of demand is less than unity. Mathematically
Elasticity of demand $= \frac{Percentage change in demand}{Percentage change in price}$

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