Micro

Price elasticity

Price elasticity of demand measures how strongly quantity demanded responds to a price change. Necessities with few substitutes are inelastic, and a single brand with many substitutes is elastic.

CAPS

Grade 11 · Economics · Micro

Economics wants the concept, then the diagram or the data, then the consequence.

The papers
Paper 1 is macroeconomics and economic pursuits. Paper 2 is microeconomics and contemporary economic issues. Each paper is 150 marks.
How to write it
Define the term as CAPS uses it. If a graph is asked for, label both axes, the curves, and the equilibrium or the shift. Then say what happens to price, quantity, growth, inflation or unemployment. A curve with no labels does not explain.
How a marker reads it
A common mix-up is saying petrol is elastic because drivers complain, when complaining is not the same as buying much less.

Essays are marked on the introduction, a body that applies the theory, and a conclusion that answers the question. A list of definitions is not an argument.

Worked theory

Worked theory. The petrol price rises by R2 a litre. A taxi owner in Alexandra still fills the tank and still runs the morning route, because passengers still need to move and the minibus has no other fuel that week. Quantity demanded barely changes, so petrol demand is inelastic. The same week one brand of chips at a spaza rises by R2, from R12 to R14. The buyer takes a different brand that stayed at R12, so quantity demanded of the dearer brand drops sharply and that brand is elastic. The same R2 did different work because one good had no close substitute and the other did.

More worked examples

Durban pharmacy counter
A patient in Durban who needs insulin does not halve the dose because the pharmacy price rises. Demand for that medicine is inelastic, because it is a necessity without a casual substitute. An energy drink on the same counter, with several similar cans beside it, loses most of its buyers if it alone goes up by R5. That drink is elastic. Necessity and substitutes decide the difference, not the size of the shop.
Pretoria bus fares
If one bus company in Pretoria raises its fare and another company on the same road does not, many passengers switch. Demand for that company's tickets is elastic. If every way into town became more expensive at once, and people still had to reach work, the fall in trips would be smaller. Demand for travel itself is less elastic than demand for one operator. Elasticity depends on how narrowly the good is defined.

In ordinary words

If price rises a lot and quantity demanded falls only a little, demand is price inelastic. Petrol is the usual case, because in the short run taxis and commuters still need fuel and cannot easily switch. If a modest price rise cuts quantity demanded sharply, demand is price elastic, which fits a particular brand of chips because the buyer can take another brand or another snack. The same person can be inelastic for a whole product group and elastic for one brand inside it, because elasticity is about the response of quantity, not about whether people complain.

In South Africa

An Alexandra petrol pump and the chip rack at the spaza across the road face the same size of price jump.

Part 1 / 4

What it is

Price elasticity of demand measures how strongly quantity demanded responds to a price change. Necessities with few substitutes are inelastic, and a single brand with many substitutes is elastic.

More worked examples

Board walkthroughs on this topic. Open one, copy the working, then try the next.

Example 1 / 20

Price rises from R10 to R12; quantity demanded falls from 100 to 80. Calculate PED.

4. Step-by-step working

01
Calculate
%ΔQ=−20%; %ΔP=+20%.
02
Divide
PED=−2020=−1 (unitary).

How we got there

Read this like a teacher at the board. We go slowly, name every number, and say why we take each step.

Explain in another language · 11

1. What is the question asking?

Read the question twice. Circle the unknown. Underline every number and unit. The paper is asking: Price rises from R10 to R12; quantity demanded falls from 100 to 80. Calculate PED.

Before any working — hunt first

Given

Numbers and units already in the sentence: R10 to · R12 · 100 to · 80. Copy each one into a column. A name without a number is not given.

Missing

After you copy the given, the letter that still has no number is missing. The paper is pointing at: PED. Circle that word — that is the missing variable.

Find

We are required to find: PED. Write that as a symbol on the left, with a question mark, before you touch a formula.

Calculate

What we need to calculate: PED = %ΔQ ÷ %ΔP. Then substitute the given, one line at a time, to get PED.

In other words — as if you have never seen this before

If you have never seen this before: PED = %ΔQ ÷ %ΔP. We will name a method in words, write the formula with no numbers, then substitute one line at a time.

2. What do we already know?

P 10 → 12; Q 100 → 80.

3. Which method — and why this one?

PED=%ΔQ%ΔP.

4. Step-by-step working

01 / 05
Calculate
%ΔQ=−20%; %ΔP=+20%.
Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.
02 / 05
Divide
PED=−2020=−1 (unitary).
Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.
03 / 05
Step G — Sense-check the size
Ask: is this the kind of number a Grade 10–12 paper would want? A speed of 3 000 ms for a learner walking, or a probability bigger than 1, means a unit or algebra slip. Estimate first: round the numbers and do the sum in your head.
Why this step: Markers write ‘unrealistic’ in the margin when the method is right but the size is wild. A 10-second head check often finds a missing 10² or a unit that never changed.
04 / 05
Step F — Box the answer with its unit
PED = 1 (unitary elastic).
Why this step: A number without a unit is half a mark on a Physics paper, and a marker can miss a Maths answer that is buried in working.
05 / 05
Step H — What the marker is looking for
On an NSC memo you usually earn: (1) a method mark for naming the right formula or idea in words, (2) an accuracy mark for substituting the given numbers with units, (3) an accuracy mark for the boxed answer with its unit. Write those three lines even if you are unsure of the arithmetic — blank pages score zero.
Why this step: First-timers chase the final number and leave the method blank. The memo still pays out for the idea and the substitution even when the last line is wrong.

5. The answer

PED = 1 (unitary elastic).

Copy onto your answer sheet — in this order

Answer: PED = 1 (unitary elastic).

6. Check it like a marker

Total revenue stays the same.

7. A trap first-timers fall into

First-timers often grab the first formula they remember, mix units (cm with m, minutes with seconds), or drop a minus sign. Write the formula in words first: “this equals that, because…”

Share on WhatsApp

Next lesson →

Economic growth and the public sector

Economics

Take topic quiz