Price Elasticity of Demand

Elastic demand, inelastic demand etc

PED

Price elasticity of demand

PED Formula

% Quantity demand / % Price

causes of Inelastic demand

Product that has very few substitutes, meaning change in price results in a small change in quantity.

Elasticity of demand coefficient

% change in quantity / % change in price

Elastic demand

A demand with a lot of substitutes

Elastic of a demand coefficient

% change in Q / % change in P

Graph above

When price goes up. Quantity demanded goes down by just a bit because inelastic quantity is insensitive to a change in price.

Graph above

When price goes down. Quantity demanded goes up by just a bit because inelastic quantity is insensitive to a change in price.

Graph above

Means an increase in a price has no affect on quantity.

Graph above

Means if a firm changes the price no one will buy.

What are elastic and inelastic demands?

Elastic demand >1, quantity changes more than price.

Inelastic demand <1, quantity changes less than price

Income Elasticity

%change in quantity / %change in income