Price elasticity of demand Flashcards
what is Price elasticity of demand
P.E.D is a proportional change in demand in response to proportional change in price
what is the formula to work out P.E.D
P.E.D = change in demand% / change in price%
how do you work out change in price % and demand%
(new-old)/old)) * 100
what is P.E.D always
negative because of the inverse relationship between P+D (one is always negative)
What is P.E.D > 1
it is elastic or sensitive to price change
what is P.E.D < 1
it is inelastic or insensitive to price change
what is P.E.D = 1
it is unitory elastic
Example
if P.E.D = 2 what does it mean
it is relatively elastic
demand will be double the percentage of price during calculation
when looking at graphs what types of gradient show inelastic
steep gradients are inelastic because change in demand<change in price
perfect vertical = perfect inelastic
when looking at graphs what types of gradient show elastic
gentle gradients are elastic because the change in demand>change in price
