Scribd
Upload
2K views3 pages

PED Worksheet

Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. PED can be unit elastic, perfectly inelastic, or perfectly elastic. The determinants of PED include the availability of substitutes, a good's proportion of income, whether it is a luxury or necessity, addiction, and the time period under consideration.

Uploaded by

Juhee Seo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2K views3 pages

PED Worksheet

Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. PED can be unit elastic, perfectly inelastic, or perfectly elastic. The determinants of PED include the availability of substitutes, a good's proportion of income, whether it is a luxury or necessity, addiction, and the time period under consideration.

Uploaded by

Juhee Seo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

2.

7 Price elasticity of demand (PED)

[Recap]
 What is price elasticity of demand (PED)?
______________________________________________________________________________________
 What is the formula of PED?
______________________________________________________________________________________
 Draw PED diagrams when the demand is price…
1) Elastic 2) Inelastic

[Extreme cases of PED]


1. Unit elastic demand
- The percentage change in quantity demanded is _________________ as the percentage change in price.

Eg. A 20% increase in the price of a mobile phone leads to a 20% decrease in quantity demanded. Calculate the PED.
PED =

2. Perfectly inelastic demand


- When a change in price leads to _______________________ in the quantity demanded.

Eg. A 10% increase in the price of a carton of milk leads to no change in quantity demanded. Calculate the PED.
PED =
3. Perfectly elastic demand
- When a change in price leads to an ______________________________ in the quantity demanded.

Eg. An extremely small increase in the price of oranges sold from a farm leads to the quantity demanded falling to
zero from infinity. Calculate the PED.
PED =
Question % change in price % change in Qd Elasticity Type of elasticity
A -10 20
B 50 -25
C -7 28
D 9 -9
E -15 0

[Determinants of PED] *Remember SPLAT !!!!


S–
P–
L–
A–
T–
1. Substitutes – number & closeness
- If there are more substitutes and if they are closer to each other, PED is more __________________.
Eg. (Pepsi and Coke) vs. (Train and Car)

2. Proportion of income
- If a good/service has a very low price and is a small proportion of consumers’ income, PED is more ________.
Eg. a pen vs. a car

3. Luxury or necessity
- If a good/service is considered a luxury, PED is more ________________. Eg. Bread vs. Rolex

4. Addiction
- If a good/service is more addictive, PED is more __________________. Eg. cigarettes
5. Time: In the short run, PED is more ________________. Eg. oil  renewable energy

You might also like