What is price elasticity of demand
It shows how much demand changes when the price changes
What does it mean if demand is elastic?
A small price change causes a big change in demand.
What does it mean if demand is inelastic?
Demand barely changes, even if the price goes up or down.
What type of products usually have inelastic demand?
Necessities like bread, petrol, or medicine.
What type of products usually have elastic demand?
Luxuries
What’s the formula for PED?
% change in quantity demanded ÷ % change in price.
What’s the PED value for perfectly inelastic demand?
0
What’s the PED value for unitary elasticity?
1
Why is PED useful for businesses?
It helps decide if raising prices will increase or decrease revenue.
What factors affect PED?
Availability of substitutes, necessity vs luxury, time, and how much of your income it takes.
