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

2641 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What relationship does Phillips curve show us?


What is cost push inflation?


Identify and describe the two main types of Inflation and their triggers.


What is the deadweight loss of a tax and how do I calculate it?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences