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Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

The formulae for price elasticity of demand is given by:

Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price

For many purposes in economics a precise figure of elasticity may not be required. The idea of relative elasticity is useful and widely used. Elasticity can be related to an elasticity of one, called unit elastic. Product with a price elasticity of demand greater than one are called price elastic and less than one price inelastic. It might be useful to describe cigarettes and alcohol as being price inelastic in demand; or sale of movie tickets and vacations as price elastic in demand.

The price elasticity of demand is determined by one or more of the following:

• The number and closeness of substitute goods
  The better the substitutes for a product, the higher the price elasticity of demand will tend to be. It's very easy for consumers to switch to, or away from, the product.
• The passage of time
  The longer the period of time, the more price elastic is the demand for a product. This is because consumers have a longer period of time in which to change their demand for the product.
• Addiction
  Addiction tends to make price elasticity of demand very inelastic.
• Proportion of income spent on good
  The more the large part of spending on goods, such as housing, the more income effect will be significant and vice versa.
• Branding and advertising
  Business which produce competing products try to reduce the number of closeness of substitutes by branding and advertising their products.