The elasticity of demand is measured using the price elasticity of demand (PED) coefficient. The formula for PED is: PED = (% Change in Quantity Demanded) / (% Change in Price) If the PED coefficient is greater than 1, the demand is considered elastic. If it is less than 1, the demand is inelastic. A coefficient of 1 indicates unitary elasticity, where the percentage change in quantity demanded equals the percentage change in price.