Syllabus: Pearson - GCSE Economics
Module: 1.1 The Market System
Lesson: Pearson - 1.1.4 Elasticity

Introduction

Elasticity is one of those ideas in economics that brings supply and demand to life. Found in the Pearson Edexcel International GCSE Economics specification (1.1.4), it sits within the broader unit on The Market System. This topic introduces learners to price elasticity of demand (PED) – a key analytical tool used to understand how consumers respond to price changes.

Students will use formulae, interpret numerical values, and apply this knowledge to real-world examples. For teachers, it’s a chance to anchor abstract economic theory in something both measurable and meaningful. For SLT and heads of department, this topic supports curriculum aims around critical thinking, data literacy, and applied understanding.

Key Concepts

Aligned with Pearson’s specification, students are expected to:

• Understand the definition of price elasticity of demand (PED).

• Learn and apply the formula:
  PED = % change in quantity demanded / % change in price.

• Calculate PED using data provided in assessments or case studies.

• Use diagrams to illustrate elastic and inelastic demand curves.

• Interpret numerical PED values:

  • PED = 0: perfectly inelastic

  • PED between 0 and 1: inelastic

  • PED = 1: unitary elasticity

  • PED > 1: elastic

  • PED = ∞: perfectly elastic

• Understand the factors influencing elasticity, including:

  • Availability of substitutes

  • Necessity vs luxury

  • Time period considered

  • Proportion of income spent on the good

These form the foundation for analysing market behaviour, consumer choice, and business pricing strategies.

Real-World Relevance

Elasticity helps students understand why some products can get away with price hikes and others can’t. A few classroom-friendly examples:

• Fuel: Inelastic – even with rising prices, people still need to drive.

• Fast fashion: Elastic – price-sensitive consumers easily switch brands.

• Concert tickets for a global star: Often inelastic – demand doesn’t drop much even as prices soar.

You can also bring in current examples like fluctuating airline prices, seasonal changes in ice cream sales, or subscription service pricing (think Netflix or Spotify). These are not only relatable, but also give students a tangible sense of why PED matters in everyday decisions.

How It’s Assessed

Pearson assesses elasticity in Paper 1: Microeconomics and Business Economics, a 1 hour 30 minute exam with four compulsory questions. Students might be asked to:

• Define PED (1-2 marks)

• Calculate PED using given data (e.g., price rise of 10%, demand falls by 20%)

• Interpret what PED values suggest about consumer responsiveness

• Draw and label demand curves showing elastic or inelastic demand

• Analyse the implications of PED for businesses or government policy

Command words include: define, calculate, explain, draw, analyse, evaluate. Encouraging fluency in these helps students build confidence and structure their responses clearly.

Enterprise Skills Integration

Elasticity naturally invites enterprise thinking:

• Problem-solving: Should a business raise or lower prices? What might the effect be on revenue?

• Decision-making: How might a firm react if it finds its product is highly elastic?

• Critical thinking: Why do some goods have a steep demand curve, while others are nearly flat?

You can turn this into an applied task: give students a fictional business (e.g., a bubble tea café or streaming service) and ask them to assess how elastic demand might be and what pricing strategy they’d choose. This builds economic reasoning in a hands-on, student-centred way.

Careers Links

Elasticity connects directly to a wide range of career pathways. According to Gatsby Benchmarks 4, 5 and 6, students should see how curriculum content connects to the working world. This topic supports that through:

• Marketing: Understanding consumer behaviour and setting effective pricing.

• Business and management: Making revenue and cost decisions.

• Data analytics: Using numerical data to support decision-making.

• Public sector: Government use of PED when setting taxes or subsidies (e.g., taxing cigarettes, subsidising transport).

Even roles like journalism, consultancy, or retail management can involve interpreting elasticity when exploring how prices affect purchasing trends.

Teaching Notes

This topic can look deceptively simple – but it’s easy for students to confuse elasticity with demand itself. A few teaching strategies:

• Use visuals: Plot demand curves for different PED values. Colour-coded diagrams help.

• Focus on cause and effect: Repeatedly reinforce that PED shows how demand responds to a price change, not the other way around.

• Scaffold calculations: Start with structured examples before moving to open-ended case studies.

• Debrief real-life pricing decisions: Discuss why Apple can charge £1000+ for a phone, while budget phones struggle with even a £50 increase.

Common pitfalls:

• Confusing inelastic with “low demand”

• Forgetting the minus sign in PED values (reinforce that it’s usually presented as an absolute)

• Applying elasticity without context – remind students it’s not just a number, it’s a behaviour pattern

Extension ideas:

• Investigate elasticity in different industries using news articles.

• Compare price sensitivity between different demographics using student survey data.

• Use a class debate to argue for or against raising prices for a popular product, based on its PED.