PED

• Price elasticity of demand


  Measures the extent to which the quantity demanded changes in response to a change in price
• Calculating price elasticity of demand (PED)

  1. Calculate percentage change in quantity demanded

  2. Calculate percentage change in price

  3. Divide percentage change in quantity demanded by percentage change in price
• Price elastic demand


  • PED is more than 1 (ignoring the sign)
  • Change in demand is higher than the change in price
• Price inelastic demand


  • PED is less than 1
  • Change in demand is less than the change in price
• Unitary price elasticity


  • PED is exactly 1
  • Percentage change in demand equals percentage change in price
• Increase in price for a price elastic product

  Leads to a decrease in total revenue
• Increase in price for a price inelastic product

  Leads to an increase in total revenue (up to a point)
• Factors influencing price elasticity

  • Strong brand loyalty and reputation
  • Necessity products
  • Habitual consumption
  • Availability of substitutes
• Price elastic products


  • Chocolate bars
  • Bread