- Economics 8

13/10/25 Factors affecting PED

What is the acronym for the factors that affect PED

MINTSA

What are the six factors that affect PED

• Market application

• Income proportion

• Necessity or luxury

• Time period

• Sustainability (the availability of substitutes)

• Addictive

State the effect of price rise, applied to the whole market regarding market application, impacting PED

When the price rise applies to the whole market, the PED is generally inelastic.

Give an example of price rise regarding the whole market (M)

McDonald’s and everything else goes up in price

State the effect of price rise, applied to a few firms regarding market application, impacting PED

When the price rise is only applied to a few firms instead of the market, the PED tends to be elastic.

Give an example of price rise regarding a few firms (M)

Only McDonald’s and Burger King go up in price

Regarding PED, when the proportion of income spent on the good is low…

PED is inelastic

Give an example of when PED is inelastic for a low income proportionate good (I)

Chocolate bar

Regarding PED, when the proportion of income spent on the good is high…

PED is elastic

Give an example of when PED is elastic for a high income proportionate good (I)

A house

Regarding PED, when a good is a necessity…

the PED is inelastic

Give an example of PED being inelastic for a necessity (N)

Bread

Regarding PED, when a good is a luxury…

the PED is elastic

Give an example of PED being elastic for a luxury (N)

New pair of sneakers

Regarding PED, when there is less time (short-term)…

PED is inelastic

Give an example for PED being inelastic during less time (T)

Paying for a train ticket while rushing to work

Regarding PED, when there is more time (long-term)…

PED is elastic

Give an example for PED being elastic during more time (T)

Changes in airline ticket prices

Regarding PED, when there a few or weak substitutes…

PED is inelastic

Give an example of PED being inelastic with few subs. available (S)

A rare type of fruit

Regarding PED, when there are many or close substitutes…

PED is elastic

Give an example of PED being elastic with many subs. available (S)

Red grapes, green grapes, ‘cotton candy’ grapes

Regarding PED, when a good is addictive…

PED is inelastic

Give an example of PED being inelastic when a good is addictive (A)

Cigarettes

Regarding PED, when a good is not addictive…

PED is elastic

Give an example of PED being elastic when a good is not addictive (A)

Medicine