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.

TP
Answered by Tara P. Economics tutor

2991 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

How to identify/draw the different types of externalities


Explain two reasons for an outward shift in the supply curve


Discuss the perfect competition model?


How best to maximise marks in exams, for example in definitions or in 20 mark questions


We're here to help

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

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences