According to this method, price elasticity of demand is measured as the ratio of percentage change in quantity demanded of the commodity to percentage change in its price. That is,
\({ E }_{ D }=\frac { ./.\quad Change\quad in\quad Quantity\quad Demanded }{ ./.\quad Change\quad in\quad the\quad Price } \)   
\( =frac \ { \triangle Q }{ Q } \times \frac { P }{ \triangle P } =\frac { \triangle Q }{ \triangle P } \times \frac { P }{ Q } \)                                                 ..............(I)
where;      P = Original price
Q = Original demand
\(\triangle \) Q = Change in demand
\(\triangle \) P = Change in price
Example: Suppose the quantity of sugar demanded by a household is 4 kg at price Rs.12 per kg. When the price falls to Rs.I I per kg, quantity demanded increases to 6 kg.
Original Pprice of the Good; P = Rs.12
Original Quantity Demanded; Q = 4kg
New Price of the Good; P₁ = Rs.11
Change in Price; \(\triangle \) P = P-P = 11-12 = (-)1
New Quantity Demanded; \(\triangle \)Q = 6 kg
Change n Quantity Supplied;\(\triangle \) Q = Q₁-Q = 6-4 = 2
Substituting appropriate values in (I); we get
 Price Elasticity of Demanded; E_D = \(\frac { 2 }{ (-)1 } \times \frac { 12 }{ 4 } =(-)6\)
The value of elasticity of demand equal to 6 in our example implies that the percentage change in quantity demanded of the commodity is 6 times the percentage change in its price.

In geometric method or point method, the elasticity of demand at any point on the straight line demand curve is determined as the ratio of the lower segment and the upper segment of the demand curve at that point.That is,  \({ E }_{ D }=\frac { Lower\quad Segment\quad of\quad the\quad DemandCurve }{ UpperSegment\quad of\quad the\quad DemandCurve } \) 
The diagram below shows the price elasticity of demand at different points on the straight line demand curve.
  

Following are the causes of a leftward shift in the demand curve:
(i) Decrease in the Prices of Substitute Goods: Substitute goods are those goods which can be used in place of one another, such as tea and coffee, or ballpoint pen and ink pen. If X and Y are substitutes then a decrease in the price ofY will decrease the demand for the X as latter is relatively expensive now. The consumer will substitute Y for X, and the demand curve for X shifts to the left.
(ii) Increase in the Prices of Complementary Goods: Complementary goods are those goods which are always consumed together to satisfy a particular need or wartt. If goods X and Yare complements, an increase in the price ofY contracts its demand, and thus, decreases, the demand for X. The demand curve for X shifts to the left.
(iii) Fall in Income: With a fall in income, the consumer is capable of buying less. Thus, a fall in income decreases the demand for normal goods at a given price, and the demand curve shifts to the left.
(iv) Negative Change in Hobbies: Tastes and preferences of consumer also affect the demand for a good. With the negative changes in hobbies, the consumer's demand for a good decreases, which shifts the demand curve towards the left.

(i) The bundles that are available to the consumer are as under:
(a) (0, 0), (0, 1), (0, 2), (0, 3), (0, 4)
(b) (1, 0), (1, 1), (1, 2), (1, 3)
(c) (2, 0), (2, 1), (2, 2)
(d) (3,0), (3, 1)
(e) (4,0)
(ii) Following bundles cost exactly Rs.40 to the consumer:
(a) (0\(\times\)10) + (4\(\times\)10) = Rs.40
(b) (1\(\times\)10) + (3\(\times\)10) = Rs.40
(c) (2\(\times\)10) + (2\(\times\)10) = Rs.40
(d) (3\(\times\)10) + (1\(\times\)10) = Rs.40
(e) (4\(\times\)10) + (0\(\times\)10) = Rs.40

Original Price; P = ?
New Price; P₁ = Rs. 11
Original Quantity Demanded; Q = 11
New Quantity Demanded; Q₁ = 7
Total Expenditure after Price Change = P₁ \(\times\) Q₁
= Rs.11\(\times\)7 = Rs.77
The price elasticity of demand is (-) I. E_D = (-) I·implies unit elasticity. That is, with any change in price (increase or decrease), the total expenditure remains unchanged. Thus,
Total Expenditure after Price Change (P\(\times\)Q) = Rs.77
 P\(\times\)11 = Rs. 77
P = \(\frac { Rs.77 }{ Rs.11 } \)    P = Rs.7
Thus, the price before change is Rs.7 per unit.

Price elasticity of demand for a good is given as \({ E }_{ D }=\frac { ./. \ \ Change\ in\ the\ Quantity\ Demanded }{./. \ \ Change\ in\ the\ Price } \)                     ........(i)
Here, E_D = (-) 0.75 and % Change in quantity demanded = 15
Substituting appropriate values in (I); we get . (-) 0.75 = \(\frac { 15 }{./. \ \ Change\ in\ Price } \)
% Change in Price = \(\frac { 15 }{ (-)0.75 } =(-)20\)
Thus, the price will fall by 20 percentage due to a rise in demand by 15 percent.

Price elasticity of demand for a good is given as \({ E }_{ D }=\frac { \triangle Q }{ \triangle P } \times \frac { P }{ Q } \)
Original Price; P = Rs.10
New Price; P₁ = Rs.9
Change in Price; P = P₁ - P = 9 - 10= - 1
Original Quantity Demanded; Q = 30
New Quantity Demanded; Q₁ = ?
Change in Quantity Demanded; \(\triangle \)Q = Q₁ - Q = Q₁ - 30         .........(i)
Elasticity of Demand; E_D = - I
Substituting appropriate values in (I), we get 
\(-1=\frac { { Q }_{ 1 }-30 }{ -1 } \times \frac { 10 }{ 30 } \)
3 = Q₁ - 30
Q₁ = 30+3 = 33
Therefore, the consumer will buy 33 units at price of Rs.9 per unit.

A normal good is a good the demand for which increases as income increases and decreases as income increases at a given price.The demand curve for inferior goods is negatively sloped.The effect of change in income on inferior goods can be explained with the help of a diagram

The diagram shows that an increase in the income from OY to OY1 decreases the demand from OQ to OQ1.Examples of inferior goods may include low quality food items like coarse, cereals, cheap vegetable oil, etc.

The demand for a commodity is relatively elastic if there are close substitutes available for it.Commodities like tea, fountain pen, ghee, etc. have relatively elastic demand as they have substitutes like coffee, ball point pen, oil, etc.respectively.For instance, people will substitute ball-point pen for fountain pen if the price for ball-point pen falls.

The demand for a commodity is relatively inelastic if there are no substitutes available for it.Commodities like salt, water, etc. have relatively inelastic demand.The demand for salt will not get affected due to a change in its price.

Substitutes are those goods which can be used in place of one another.Following are the examples of two goods which are substitutes of each other:
(i) Ghee and oil
(ii) Fountain pen and ballpoint pen
(iii) Tea and coffee
The demand for a good is affected by changes in the price of substitute goods.
(i) Rise in the Price of Substitute Good:  A rise in the price of tea will increase the demand for the coffee as latter is relatively cheaper now.The consumer will substitute coffee for tea.The demand curve for coffee would shift to the right.
(ii) Fall in the Price of Substitute Good: A fall in the price of tea will decrease the demand for the coffee as latter is relatively expensive now.The consumer will substitute tea for coffee.The demand curve for coffee would shift to the left.

A related good can be complement or a substitute.The effect of a rise in the price of a substitute and a complement is described below.
Substitutes: If goods X and Y are substitutes, an increase in the price of Y will increase the demand for the X; and a decrease in the price of Y will decrease the demand for X.
Complements: If goods X and Y are complements, a fall in the price of Y leads to a rise in the demand for X, and a rise in the price of Y leads to a fall in the demand for X.

The budget set includes all the possible bundles of two goods (commodities) that a consumer can afford to buy with his or her income at the prevailing market prices.The budget set depends on the income of the consumer and the prices of the goods and services.Accordingly, a budget set will change under the following conditions:
(i) Change in the money income of the consumer.
(ii) Change in the price of any of the goods.