Please can you help me to understand the concept of price elasticity of demand (PED)?
PED is a measure of the responsiveness of demand following a change in the price of a good or service e.g. if the price of good X rose by 20%, PED would measure the extent to which the demand for good X changed following the 20% increase in price. Goods can either be inelastic or elastic. For goods with an inelastic PED, a change in the price of a good or service will have a less than proportional change in demand. Therefore the demand curve will have a steep gradient. The opposite is true for an elastic good. There are many factors which affect a good's PED including the number and closeness of substitutes, the degree of necessity, the percentage of income that good or service represents and the time period over which PED is determined.
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