PED

• PED measures the responsiveness s of a change in demand to a change in price
• Formula for PED

  
• A price elastic good is very responsive to a change in price

  
• A price inelastic good has a demand that is relatively unresponsive to a change in price.

  
• $Elastic Ped =$$x>1$

  Ped is greater than -1
• $Inelastic Ped =$$x<1$

  • PED is less than -1
• Factors influencing PED:

  • Necessity
  • Substitutes
  • Addictiveness or habitual consumption
  • Proportion of income spent on the good
  • Durability of the good
  • Peak and off-peak demand