PED

• Price elasticity of demand - The responsiveness of quantity demanded to a change in price.

  PED = %change in demand / %change in price (always presented as a negative)

  • zero - totally inelastic - demand is completely unresponsive to price changes
  • 0 to 1 - inelastic - demand responds less proportionately to price changes
  • 1 - unitary elastic - demand & prices are directly proportional
  • over 1 - elastic - demand responds more than proportionately to a price change
• Factors affecting PED:

  • substitutes available
  • Percentage of income sent on product
  • luxury or necessity
  • addiction to product
  • time to find a replacement
• A business reduce the price of product from £10 to £7. As a result demand increases from 10,000 unit to 12,000 units. Based on thus information what is the PED of this product


  -0.67