Flashcards in 3.2g Price Elasticity of Demand Deck (10):

1

## What does PED measure?

### The responsiveness of demand for a product following a change in price

2

## PED formula

### PED = % change in quantity demanded ÷ % change in price

3

## What is the PED if demand is perfectly inelastic?

### 0 - demand does not change at all when price changes

4

## What is the PED if demand is inelastic?

### Between 0 and 1 - percentage change in demand is smaller than percentage change in price

5

## What is the PED if demand is unit elastic?

### 1 - percentage change in demand is exactly the same as percentage change in price

6

## What is the PED if demand is elastic?

### Above 1 - percentage change in demand is larger than percentage change in price

7

## What happens if PED is inelastic and a firm lowers its price?

### Total revenue decreases

8

## What happens if PED is inelastic and a firm raises its price?

### Total revenue increases

9

## What happens if PED is elastic and a firm lowers its price?

### Total revenue increases

10