chapter 10- price elasticity of demand (PED)
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14 Terms
what is price elasticity of demand
a measure of how responsive quantity demanded is to a change in price
what is the formula for PED
% change in quantity demand / % change in quantity supplied
what does elastic demand mean
quantity demanded changes by a greater percentage than price
what PED value shows elastic demand
PED >1
what is inelastic demand
quantity demanded changes by a smaller percentage than price
what PED value shows inelastic demand
PED<1
what is unitary elasticity
quantity demanded changes by the same percentage as price
what PED value shows unitary elasticity
PED= 1
what does perfectly inelastic demand mean
quantity demanded does not change when price changes
what is the PED value for perfectly inelastic demand
PED=0
what does perfectly elastic demand mean
consumers will only buy a good/service at a specific price
what is the PED value for perfectly elastic demand
PED=∞
what does a high PED mean
demand is relatively responsive to changes in price
what does a low PED mean
demand is relatively unresponsive to changes in price