What is price elasticity of demand?

Price elasticity of demand (PED) measures the responsiveness of demand in relation to a change in price. The formula for PED is %change in quantity demand / %change in price.

If a good has an elastic PED it will have a value greater than 1, which means that a change in price leads to a larger percentage change in demand. Examples of goods which usually have an elastic PED include luxury goods such as sports cars, goods with a high price as well as goods with many substitutes.

If a good has an inelastic PED it will have a value less than 1, which means that a change in price leads to a lower percentage change in demand. Examples of goods which have an inelastic PED include neccessities, goods which are bought frequently, and those with a low price.

AL
Answered by Alexandra L. Economics tutor

2870 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Describe the effects of an indirect tax (ex. sales tax) on the market for cigarettes.


Discuss the view that the measures taken to reduce the size of the budget deficit will inevitably result in a rise in unemployment in the UK.


How does an increase in the interest rate affect the level of investment?


What is the difference between law of diminishing returns to a factor and decreasing returns to scale?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning