Definition: Price Elasticity (of Demand)

Price Elasticity (of Demand) - "the absolute value of the ratio of the percentage change in quantity demanded to the percentage change in price. For example, the increased price of a good, such as sisal used for fiber, by 10 percent, reduces the amount of sisal demanded by 20 percent, a price elasticity of 0.20/0.10 or 2.0." - source: Economic Development 4th Edition by E. Wayne Nafziger