PED

PED - measure of how responsive demand is to a change in price

Price elastic - change in price leads to change in demand

Price inelastic - change in price has little effect on demand


%change in quantity demanded/%change in price


What determines price elasticity?

  • Availability of substitutes

  • Price of competition

  • Time

  • Brand loyalty

  • Income

  • Nature of the good (want or need)