3.2g - Price Elasticity of Demand

Question 1

Price elasticity of demand definition

Answer 1

The responsiveness of demand for a product following a change in its price

Question 2

PED formula

Answer 2

% change in quantity demanded / % change in price

Question 3

What does it mean if the PED = 0?

Answer 3

It is perfectly inelastic - demand does not change at all when price changes

Question 4

What does it mean if the PED is between 0 and 1?

Answer 4

It is inelastic - the percentage change in demand is smaller than the percentage change in price

Question 5

What does it mean if the PED = 1?

Answer 5

It is unit elastic - the percentage change in demand is exactly the same as the percentage change in price

Question 6

What does it mean if the PED is greater than 1?

Answer 6

It is elastic - the percentage change in demand is higher than the percentage change in price

Question 7

Examples of inelastic products:

Answer 7

• Petrol
• Water
• Cigarettes

Question 8

Examples of elastic products:

Answer 8

• Heinz soup

- Dairy Milk chocolate bar