IB Economics: Elasticity of Demand — Tutor Lesson Plan (PED, YED, XED, total revenue)

2026-10-28

Students recite that a value above one is elastic but then guess whether a price cut raises revenue. One calculation locks the two together.

Objectives — the student can compute PED by percentages, predict the revenue effect from PED, and use YED and XED to classify goods.

01 Prerequisites (3-minute check)

If any of these fails, fix it before the lesson starts.

Skill	Quick check	Pass mark
Percentages	A fall from 100 to 90 is what percentage?	10 percent
Law of demand	The direction between price and quantity	Inverse
Total revenue	Price multiplied by quantity	P times Q

02 Lesson flow (60 minutes)

Time	Stage	Tutor does	Student does
0-8 min	Three elasticities	What PED, YED and XED each measure	State the difference
8-24 min	Computing PED	Price 100 to 90, quantity 200 to 260	Get -3
24-36 min	Elasticity and revenue	20 000 to 23 400	Get a rise of 3 400
36-48 min	YED and XED	income +10 percent, quantity +12 percent	Get 1.2 and -3
48-56 min	IB structure	Define, calculate, explain, evaluate	Write four paragraphs
56-60 min	Exit check	Three questions marked	Finish alone

03 Teaching script (read it out)

Scene 1: PED uses percentages, not quantities

PED is the percentage change in quantity demanded divided by the percentage change in price. Price 100 to 90 is -10 percent, quantity 200 to 260 is +30 percent, so PED is -3.
An absolute value above one is elastic, exactly one is unit elastic, below one is inelastic.

Student explains why percentages are used rather than absolute quantities.

Scene 2: Elasticity decides whether a price cut pays

Before the cut revenue is 100 times 200, that is 20 000; afterwards it is 90 times 260, that is 23 400, a rise of 3 400.
When demand is elastic a price cut raises revenue; when it is inelastic a price cut lowers it.

Note: always show both revenue figures; saying revenue rises is not enough.

Scene 3: YED sorts goods, XED sorts relationships

YED is the percentage change in quantity over the percentage change in income. Income +10 percent with quantity +12 percent gives 1.2, a luxury good.
XED uses another good price as denominator: a 10 percent fall with a 30 percent rise in quantity gives -3, the mark of complements.

Student classifies a positive XED (substitutes).

04 Question types and worked steps

Type	Example	Steps	Answer
PED	100 to 90, 200 to 260	Two percentages divided	-3
Revenue	before and after a cut	Compute P times Q twice	20 000 to 23 400
YED	income +10 percent, quantity +12 percent	Divide and classify	1.2, luxury
XED	substitute price -10 percent, quantity +30 percent	Divide and read the sign	-3, complements

Sanity check (teach this): PED is negative under the law of demand. A positive value means the price and quantity changes were recorded in the wrong direction.

05 Independent practice (3 questions)

Question	Answer	What to watch
PED for 100 to 90 and 200 to 260	-3	Both percentages computed
Revenue change after the cut	20 000 to 23 400	Two figures shown
YED for income +10 percent and quantity +12 percent	1.2	Classified as a luxury

06 Common mistakes and what to say

Mistake	Student writes	Say this
Absolute quantities used	PED written -0.6	Use percentage changes.
Sign dropped	PED written 3	PED is negative; judge elasticity by absolute value.
Price cut always raises revenue	inelastic case wrong	With inelastic demand a cut lowers revenue.
YED and XED swapped	income in the denominator of XED	YED divides by the income change.

07 Homework (paper, section and question numbers)

IB economics chapter index — Use the three questions on this page

08 Exit check (last 5 minutes)

Question	Answer	Decision
PED for 100 to 90 and 200 to 260	-3	All three right: move to supply elasticity
Revenue before and after the cut	20 000 to 23 400	One wrong: re-teach the revenue link
Classification by YED	1.2, a luxury	Two wrong: repeat scene 3

09 Tutor FAQ

Must I draw the diagram?

Yes, most PED questions want a demand curve with the price and quantity change marked.

Memorise three formulas?

They share one structure: percentage change in quantity over percentage change in the determinant.

What belongs in the evaluation?

Time horizon, number of substitutes, and the share of income spent.

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A TutorZone lesson-prep guide. Written by the TutorZone team; questions and lesson flow are original and are not taken from any school or publisher material.