PED

• What is the definition of price elasticity of demand?

  The responsiveness to demand to changes in price
• What is the PED for perfect inelasticity?

  PED=0
• What is the elasticity for inelastic demand?

  0<PED<1
• What is the PED for unitary elasticity?

  PED=1
• What is the PED for elastic demand?

  PED>1
• What is the PED for perfect elasticity?

  PED=infinity
• What is the formula for PED?

  Price Elasticity of Demand (PED) = (Percentage change in quantity demanded) / (Percentage change in price)
• What does price elastic demand tell you about a good/service?

  • PED>1
  • When a price is changed the change in demand is relatively higher
  • They are luxury goods
  • They are expensive and a large percentage of income
  • They are good with many substitutes and a very competitive market
  • Goods that are bought frequently
• What is perfect inelasticity?

  • PED=infinity
  • This is an extreme case where the tiniest change in price will have a huge affect for the demand of a good or service.
• What is unitary price elasticity?

  • PED= 1
  • At this point a change in price is reflected by a change in demand which is exactly the same
• What is price inelastic demand tell you about a good/service?

  • 0<PED<1
  • The market is insensitive to changes in price
  • Changes in demand are relatively smaller than changes in price
  • Have a few/no close substitutes
  • They are necessities
  • They are addictive
  • They cost a small percentage of income
  • They are bought infrequently
• What is perfect price inelasticity?

  • PED=0
  • This is an extreme case where a change in price does not affect demand at all.
• What is price inelasticity?

  • Where price changes have little impact on demand.
  • Insensitive to price changes
  • Often few substitutes and competitors
  • Luxury/strong brands
• What is price elasticity?

  • Where demand is very responsive to changes in price
  • Sensitive to price changes
  • There are often many substitutes or competitors