Price Elasticity of demand

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5 Terms

1
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What is PED

A measure of how quantity demanded of a product responds to change in price

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What is the formula?

%Change in Quantity demanded / %change in price

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What does it mean if PED > 1?

Demand is elastic(consumers are sensitive to price changes)

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What does it mean if PED < 1?

Demand is inelastic(Consumers are less sensitive to price changes)

5
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Factors affecting PED

Availability of substitutes, necessity vs luxury , brand loyalty, proportion of income spent