1.1.4 PED Flashcards
1
Q
Price elasticity of demand
A
The responsiveness of demand to a change in price
2
Q
PED equation
A
PED = %change in quantity demanded/%change in price
3
Q
Price elastic/elastic demand (PED>1)
A
When a change in price results in a greater change in the quantity demanded
4
Q
Perfectly elastic demand (PED = infinity)
A
An increase in price results in no demand
5
Q
Price inelastic/inelastic demand (PED<1)
A
When a change in price results in a proportionately smaller change in quantity demanded
6
Q
Perfectly inelastic demand (PED = 0)
A
A change in price results in no change in quantity demanded
7
Q
Unitary elastic demand (PED = -1)
A
When a change in price is equal to the change in quantity demanded
8
Q
Factors that affect PED
A
- Availability of substitute
- Degree of necessity
- Percentage/proportion of income spent on good or service
- Time
- Habits
