HKDSE Economics | Demand, Supply and Elasticity Tutor Prep Guide

HKDSE Economics | Demand, Supply and Elasticity Tutor Prep Guide | PED, PES, YED, XED

2026-11-01

Tutor lesson-prep guides · Secondary Economics

Students can recite that a higher price means a lower quantity demanded, then guess whether raising the price raises revenue. This lesson ties price, quantity and revenue together with one elasticity formula, after which every elasticity question is the same three steps.

Objectives — Students can: 1) tell a movement along a curve from a shift of the curve; 2) calculate PED from percentage changes and classify the elasticity; 3) use PED to predict the direction of total revenue; 4) explain what PES, YED and XED measure and which good each value describes.

01 Prerequisites (3-minute check)

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

Skill	Quick check	Pass mark
Percentage change	The original value is the denominator	(new minus old) divided by old
Demand and supply diagram	Quantity on the horizontal axis, price on the vertical	Demand slopes down, supply slopes up
Opportunity cost	The value of the next best option	What is given up

02 Lesson flow (60 minutes)

Time	Stage	Tutor does	Student does
0-8 min	Four curves	Demand, supply, equilibrium	Draw equilibrium P and Q
8-20 min	Shift versus slide	Six demand factors, five supply factors	One real example each
20-34 min	PED	Formula, absolute value, categories	PED comes out at 1.5
34-44 min	PED and revenue	Elastic demand: raising price cuts revenue	Revenue $10,000 to $8,400
44-54 min	PES, YED, XED	Three formulas, three uses	PES 0.5, YED 1.5, XED -0.38
54-60 min	Exit check	Three questions collected and marked	Done independently

03 Teaching script (read it out)

Scene 1: Movement along versus shift: one sentence each

If the price changes, the point moves along the curve, which changes the quantity demanded or supplied. If anything other than the price changes, the whole curve shifts, which changes demand or supply. Higher demand is the curve moving right; a higher quantity demanded is a point moving up the same curve.
Six demand factors: income, prices of related goods, tastes, population, expectations, season. Five supply factors: costs, technology, prices of related goods, number of suppliers, expectations.

Ask the student: the government adds a sugar tax, what happens to the soft drink market? Costs rise, so supply shifts left, and demand does not move.

Scene 2: PED: one formula that reaches total revenue

PED is the percentage change in quantity demanded divided by the percentage change in price, taken as an absolute value. Price rises from $20 to $24, a rise of 20 per cent. Quantity falls from 500 to 350, a fall of 30 per cent, so PED is 1.5 and demand is elastic.
Total revenue is price times quantity: $20 times 500 is $10,000, and $24 times 350 is $8,400, a fall of 16 per cent. The rule: with elastic demand a price rise cuts revenue, with inelastic demand it raises revenue, and with unit elasticity revenue is unchanged.

Ask the student to compute: with PED equal to 0.5, why does the same price rise now raise revenue? The quantity falls by a smaller percentage than the price rises.

Scene 3: The three satellite formulas: PES, YED and XED

First, PES is the percentage change in quantity supplied divided by the percentage change in price. Price rises 20 per cent and quantity supplied goes from 300 to 330, up 10 per cent, so PES is 0.5: capacity is fixed in the short run.
Second, YED is the percentage change in demand divided by the percentage change in income. Income rises 10 per cent, demand goes from 200 to 230, up 15 per cent, so YED is 1.5: above one means a luxury, between zero and one a necessity, and below zero an inferior good.
Third, XED is the percentage change in the demand for good A divided by the percentage change in the price of good B. The price of B falls from $30 to $24 and demand for A rises from 800 to 860, so XED is -0.38. Negative means complements, positive means substitutes, and near zero means unrelated.

Reminder: never take the absolute value of XED; the sign is the answer.

04 Question types and worked steps

Type	Example	Steps	Answer
Calculate	Price $20 to $24, quantity 500 to 350	PED equals percentage change in Q over price	1.5, elastic
Calculate	Total revenue before and after	Price times quantity, both periods	$10,000 to $8,400
Classify	Income up 10 per cent, demand up 15 per cent	YED equals change in Q over change in Y	1.5, a luxury
Explain	What is the relationship between A and B	The sign of XED	-0.38, complements

Sanity check (teach this): PED is always positive once the absolute value is taken, so a negative answer means the sign was forgotten; elastic demand is above one and here it is 1.5. Revenue must use the new price with the new quantity. A negative YED means an inferior good, and only a value near zero lets you say the goods are unrelated.

05 Independent practice (3 questions)

Question	Answer	What to watch
PED for price $20 to $24 and quantity 500 to 350	1.5	Change in Q over change in price
PES for price $20 to $24 and quantity 300 to 330	0.5	Change in Qs over change in price
YED when income rises 10 per cent and demand rises 15 per cent	1.5	Change in Q over change in income

06 Common mistakes and what to say

Mistake	Student writes	Say this
Treating a movement as a shift	Says a price rise increases demand	A price rise moves along the curve; it does not shift it.
Using the new value as the denominator	Uses 350 and gets a 42.9 per cent fall	The denominator is always the original number.
Forgetting the absolute value for PED	Reports minus 1.5 and calls it inelastic	PED is read as an absolute value, so 1.5 is elastic.
Multiplying the new price by the old quantity	Gets 12,000 and says revenue rose	New price pairs with the new quantity, 24 times 350.

07 Homework (paper, section and question numbers)

Secondary Economics chapter index — All chapters
Prep guide master index — Other chapters in this subject

08 Exit check (last 5 minutes)

Question	Answer	Decision
PED and the elasticity category	1.5, elastic	All three right: move to market intervention
Revenue after the price rise with elastic demand	Falls to $8,400	One wrong: reteach total revenue
What a negative XED means	The goods are complements	Two wrong: restart scene three

09 Tutor FAQ

Why is PED taken as an absolute value?

The law of demand already fixes the direction, so the absolute value measures only the size of the response and comparisons stay clean.

Does a price rise always cut revenue when demand is elastic?

Yes. The percentage fall in quantity is larger than the percentage rise in price, so price times quantity must fall.

Why is PES usually below one in the short run?

Factors of production and capacity cannot change quickly, so suppliers cannot raise output at once.

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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.