Price Elasticity of Demand

• Price Elasticity of Demand (PED) : Is a measure of how responsive demand is due to a change in price
• Price Elasticity of Demand (PED) = %Change In quantity demanded / %Change in price
• What type of price elasticity would this be?

  Inelastic

  
• What type of price elasticity would this be?

  Elastic

  
• What is it called when PED = -1?

  Unitary Elastic, this happens as a result of the change in quantity demanded being the exact same as the change in price
• Unitary Elastic Demand: When a change in the price will lead to an equal change in demand
• Perfectly Elastic Demand(Negative Infinity): When a change in the price leads to an infinite change in the quantity demanded
• As demand becomes more elastic, consumers will?

  Respond more to changes in price
• Perfectly Inelastic Demand: This is when a change in price results in no change in demand. This is applicable for items such as life saving drugs.