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What is the definition of price elasticity of demand (PED)?
Price elasticity of demand (PED) measures how responsive the quantity demanded of a good or service is to a change in its price.
How is price elasticity of demand (PED) calculated?
PED is calculated as the
percentage change in quantity demanded
divided by the
percentage change in price.
What is the formula for calculating PED?
PED = (Percentage change in quantity demanded) / (Percentage change in price)
If the quantity demanded of a product increases by 10% when its price decreases by 5%, what is the price elasticity of demand?
PED =
10%
/ (
-5%
) =
-2
What does a PED of -2 indicate about demand?
It indicates that demand is
elastic
, meaning it is relatively
responsive
to
price changes.
What are the components needed for the PED calculation?
The components needed are
initial
quantity,
new
quantity, and
percentage change in price.
What is the initial quantity and the new quantity in the given problem?
Initial quantity: 1300 units, New quantity: 1495 units.
How do you calculate the percentage change in quantity demanded?
Percentage change in quantity = (
Change in
quantity /
Original
quantity) ×
100.
If the original quantity demanded was 800 units and it increased to 880 units, what is the percentage change in quantity demanded?
Percentage change = (
80
/
800
) ×
100
=
10%.
What is the percentage change in price given in the problem?
The percentage change in price is a 12% decrease.
How should price decreases be expressed in PED calculations?
Price decreases should be expressed as negative percentages.
If a store reduces its prices by 8%, how should this be expressed when calculating PED?
It should be expressed as
-8
%.
How should a price increase of 5% be expressed in PED calculations?
It should be expressed as +5% or simply 5%.
What is the formula to calculate price elasticity of demand (PED)?
PED = (Percentage change in quantity demanded) / (Percentage change in price).
How would you express a 3% decrease in price in a PED calculation?
A 3% decrease would be expressed as -3%.
If the percentage change in quantity demanded is 15% and the percentage change in price is -12%, what is the PED?
PED =
15%
/ (
-12%
) =
-1.25.
What does a PED of -1.25 indicate about demand?
It indicates that demand is
elastic
,
meaning
the
percentage change
in quantity demanded is
greater
than the
percentage change in price.
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