Price Elasticity of Demand

Elastic demand, inelastic demand etc

PED

Price elasticity of demand

PED Formula

% change in quantity demand / % change in price

Inelastic demand

Product has very few substitutes, addictive, a necessity and low proportion of income.

Elasticity of demand coefficient

% change in quantity / % change in price

Elastic demand

A demand with a lot of substitutes, high proportion of income, a luxury and a long time period

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

Examples of inelastic demand

Drugs, vapes, smoking, specific medical needs, water, cheaper goods.

Examples of elastic demand

Diamonds, expensive cars, electronics, fun activities.