. PED is the responsiveness of quantity demanded to a change in price.
. Formula of PED:
PED = %Δ qty demanded ÷%Δ price
. Inelastic Demand
1) PED lower than 1
2) The necessity of the product is high – it is either essential or habitual.
3) A change in price has little effect on the change in demand.
. Formula of PED:
PED = %Δ qty demanded ÷%Δ price
. Inelastic Demand
1) PED lower than 1
2) The necessity of the product is high – it is either essential or habitual.
3) A change in price has little effect on the change in demand.
. Elastic Demand
1) PED greater than 1
2) The necessity of the product is relatively low.
3) Demand would respond quickly and more drastically.
1) PED greater than 1
2) The necessity of the product is relatively low.
3) Demand would respond quickly and more drastically.
. When demand is price inelastic an increase in price would raise revenue.
. When demand is price elastic a decrease in price would raise revenue.
. Factors that affect PED:
1) The number of substitutes
2) The period of time
3) The proportion of income spent on the commodity.
4) The necessity of the product
. When demand is price elastic a decrease in price would raise revenue.
. Factors that affect PED:
1) The number of substitutes
2) The period of time
3) The proportion of income spent on the commodity.
4) The necessity of the product