PED

Question 1

What is PED

Answer 1

the responsiveness of demand to a change in price

Question 2

PED equation

Answer 2

QD%/P%

Question 3

What is a PED>1?

Answer 3

the change in quantity demanded is bigger than the change in price. The demand is very responsive to price changes. This is price elastic demand

Question 4

What is a PED<1?

Answer 4

the change in quantity demanded is less than the change in price. The demand is not very responsive to price changes. This is price inelastic demand.

Question 5

What if PED=0

Answer 5

quantity demanded doesn’t change when price increases This is perfectly inelastic demand

Question 6

What is Perfectly elastic demand

Answer 6

Perfectly elastic demand gives a PED of infinity

Question 7

What if PED=1

Answer 7

the change in quantity demanded is the same as the change in price. This is known as unit elastic demand.

Question 8

Determinants of PED

Answer 8

Proportion of income spent – the higher the proportion the higher the PED
Addictive – the more addictive the product, the lower the PED
Necessity – the more of a necessity the product is, the lower the PED
Time – PED becomes more elastic over time
Substitutes – the more substitutes available, the higher the PED