PED

• Price Elasticity of Demand definition 


  PED a measure of how the quantity demanded of a good repsonds to a change within its price
• Elastic PED


  When the Quantity demanded changes at greater rate than price

  >1

  
• Inelastic PED 


  Quantity demanded changes at a lesser rate than price

  PED <1

  
• Perfectly inelastic demand

  The quantity demanded remains the same although the price changes (IE DEMAND IS COMPLIMENTARY)

  =0

  
• FACTORS AFFECTING ELASTICITY: Substitutes


  The more substitutes available, the more elastic the demand. A consumer's options increase, making them more responsive to changes in price.
• FACTORS AFFECTING ELASTICITY: Percentage change in price


  A larger percentage change in price leads to a more elastic demand. A smaller percentage change has a weaker impact on demand, making it less elastic.
• FACTORS AFFECTING ELASTICITY: Time period


  Elasticity is generally higher in the long run than in the short run. Consumers may delay or adjust their consumption in response to changes in price over time.
• FACTORS AFFECTING ELASTICITY: Necessity of the good


  Essential goods have a lower elasticity of demand, as consumers are less responsive to price changes. Luxury goods have a higher elasticity, as consumers are more responsive to price changes.
• FACTORS AFFECTING ELASTICITY: Demand curve shape


  A linear demand curve implies constant elasticity, while a non-linear demand curve implies changing elasticity. The shape of the demand curve affects how responsive demand is to price changes.
• CPED = %change in Qd/%change in P