Price Elasticity of Demand

• Price elasticity of demand is the degree to which the quantity demanded of a good or service is affected by a change in price
• A business and the marketing department will want to know how sensitive their demand is to a change in price
• PED = % change in quantity demanded ÷ % change in price
• If PED = <1 = Price inelastic
• If PED = >1 = Price elastic
• If PED = 1 = Unitary elastic
• Price elastic means the percentage change in the quantity demanded is greater than the percentage change in price
• Price inelastic means the percentage change in the quantity demanded is less than the percentage change in price