Save
Theme 1
Price elasticity of demand
Save
Share
Learn
Content
Leaderboard
Share
Learn
Created by
Inaiya
Visit profile
Cards (19)
Price Elasticity of Demand (PED)
Measure of how responsive the quantity demanded is to a change in price
View source
Increase in price
Fall in the quantity demanded
View source
Fall in price
Increase in the quantity demanded
View source
Price elasticity of demand
Helps calculate how responsive the change in quantity demanded will be to a change in price
View source
The PED value is always
negative
View source
Calculation of PED
PED = %
change
in
quantity demanded
/ %
change in
price
View source
To calculate a % change
% change = (
New value
-
Original value
) /
Original value
x
100
View source
Worked example
The price elasticity of demand for popcorn at the cinema is
-0.8.
The current price of a box
of
popcorn is
£5.
Calculate the
percentage change
in quantity
demanded following
a
£1 increase in the price of a
box of
popcorn.
View source
Step 1: Calculate the percentage change in price
£5 - £1/£5 x 100 =
20%
View source
Step 2: Insert the data into the PED formula
PED = % change in quantity demanded / % change in price
View source
Step 3: Rearrange and solve for x
% change in quantity demanded =
PED
x
% change in price
View source
Price elasticity of demand (PED)
Measure of how responsive the change in quantity demanded will be to a change in price
View source
Calculation of PED
Use the formula:
PED = (% change in quantity demanded) / (% change in price)
View source
The quantity demanded falls by
16%
View source
If the price increases, the quantity demanded
decreases
View source
Interpretation of PED numerical values
PED > 1:
Elastic demand
(
more responsive to price changes
)
PED between 0 and 1:
Inelastic demand
(
less responsive to price changes
)
View source
Factors influencing the price elasticity of demand
Brand loyalty
Availability of substitutes
Proportion of income taken up by the product
Whether
the
product is a luxury or necessity
Time period considered
View source
Significance of PED to businesses
If demand is price
inelastic
(PED <
-1
), raising price
increases total revenue
If demand is price elastic (PED >
-1
), raising price
decreases total revenue
View source
PED value
Impact on total revenue when price increases or decreases
View source
See similar decks
price elasticity of demand
microeconomics theme 1
16 cards
Price elasticity of demand
Economics > Theme 1
25 cards
Price Elasticity of Demand
Economics > Theme 1
5 cards
price elasticity of demand
business theme 1
3 cards
Price Elasticity Of Demand ( PED)
Business > Theme 1
10 cards
price elasticity of demand
business - all topics (theme 1)
13 cards
Price elasticity of demand (Pack 5)
Economics > Theme 1
12 cards
1.2.3 Price Elasticity of Demand
Edexcel A-Level Business > Theme 1: Marketing and People > 1.2 The Market
47 cards
2.4 Price Elasticity of Demand
AP Microeconomics > Unit 2: Supply and Demand
64 cards
Price elasticity of demand
Business > Theme 1
6 cards
Price elasticity of demand
Business Theme 1
20 cards
2.2.1 Price Elasticity of Demand (PED)
Edexcel GCSE Economics > 2. Microeconomics > 2.2 Price Elasticity
47 cards
2.2.1 Price Elasticity of Demand (PED)
Edexcel GCSE Economics > 2. Microeconomics > 2.2 Price Elasticity
46 cards
2.2 Price Elasticity
Edexcel GCSE Economics > 2. Microeconomics
87 cards
3.1.3.4 Price elasticity
AQA GCSE Economics > 3.1 How markets work > 3.1.3 How prices are determined
41 cards
2.2 Price Elasticity
Edexcel GCSE Economics > 2. Microeconomics
92 cards
2.2.2 Price Elasticity of Supply (PES)
Edexcel GCSE Economics > 2. Microeconomics > 2.2 Price Elasticity
40 cards
3.3.4 Price elasticity of supply
AQA A-Level Economics > 3. Individuals, firms, markets and market failure > 3.3 Price determination in a competitive market
45 cards
2.2.2 Price Elasticity of Supply (PES)
Edexcel GCSE Economics > 2. Microeconomics > 2.2 Price Elasticity
46 cards
1.2.4 Income Elasticity of Demand
Edexcel A-Level Business > Theme 1: Marketing and People > 1.2 The Market
34 cards
3.3.2 Price, income, and cross elasticities of demand
AQA A-Level Economics > 3. Individuals, firms, markets and market failure > 3.3 Price determination in a competitive market
89 cards