Demand and PED

Question 1

Value of PED between 0 and -1

Answer 1

Inelastic PED

Question 2

Value of PED “greater” than -1

Answer 2

Elastic PED

Question 3

PED value of infinit

Answer 3

An infinite amount can be demanded at the given price, no change in price

Question 4

PED value of -1

Answer 4

Change in quantity demanded is equal to the change in price

Question 5

PED value of 0

Answer 5

There is no change in quantity demanded as the price changes

Question 6

Importance of PED for consumers

Answer 6

• If the product they buy is inelastic, they are likely to face price rises, which can hurt their standard of living.
• Prompts them to search for different substitutes.
• If the product they want is PED inelastic, the government can impose taxes on it, hindering their income.

Question 7

Importance of PEd for producers

Answer 7

• Can charge high prices if the product is inelastic
• Can price discriminate against different groups of people, if some people are more dependant on the good/service, charge them higher to increase revenue even more.