Price Elasticity of Demand

This is a simple calculation of PED using the following data:

A product costs 25p and its price drops to 20p. Logically, and by the law of demand, as price goes down demand should increase. The quantity demanded increases from 200 units to 220 units.

This means customers are buying more of the product. But how much more? Especially in consideration of the decrease in price.

Price Elasticity of Demand measures the responsiveness of the change in quantity demanded relative to a change in price.

As this problem works out to 0.5, we determine that demand for this product is inelastic. As a slight change in price leads to a less than proportionate change in quantity demanded.

Category:

Education

Tags:

• Price
• Elasticity
• of
• Demand

[hatcomcom]

Thank you for this; I really found it useful :)

Though, I think I prefer it when you feature in the video itself, than doing a voice-over in the videos (but that c ould just be how I learn.. ) Thanks again :D