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
• PED

  • PED > 1: Demand is price elastic (change in demand is greater than change in price)
  • PED < 1: Demand is price inelastic (change in demand is less than change in price)
  • PED = 1: Demand has unitary price elasticity (change in demand equals change in price)
• Factors influencing price elasticity

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

  • Chocolate bars
  • Bread
  • Newspapers