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Summary Unit 2b - Business Economics price elasticity of demand £6.99
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Summary Unit 2b - Business Economics price elasticity of demand

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a) Calculation of price elasticity of demand b) Interpretation of numerical values of price elasticity of demand c) The factors influencing price elasticity of demand d) The significance of price elasticity of demand to businesses in terms of implications for pricing e) Calculation and interpre...

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  • April 6, 2023
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  • 2022/2023
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Price elasticity of demand (PED)

v Price elasticity of demand is a measure of how
responsive demand is to a change in price
v There is an inverse relationship between price and
demand
v As price goes up demand goes down
v As price goes down demand goes up
v But the question is by how much? Is the change in
demand more than proportional to the change in
demand or less than proportional?
v PED is price inelastic as the fall in demand is less
than the fall in price.
v PED is price elastic as the fall in demand is greater
than the fall in price.


¥ Price elastic demand means that a change in price
will lead to a more than proportional change in
demand i.e. demand is sensitive to price changes
¥ Price inelastic demand means that a change in
price will lead to a less than proportional change
in demand i.e. demand is not so sensitive to
changes in price

PED can be calculated using the formula:
% change∈quantity demanded
% change ∈ price
= PED


Step 1 Change in Demand x 100
Original Demand

Step 2 Change in Price x 100
Original Price

Step 3 % change in Qd
% change in P

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