Summary
Summary Price elasticity of demand (PED)
- Institution
- OCR
A summary of price elasticity of demand (PED).
[Show more]
Seller
Follow
Content preview
4/11/21Elasticity
Recap task
Competitive supply – when a firm can supply alternative products using its factors of production, for example land to
grow crops or to grow biofuel
Joint supply – when more than one product can be supplied together, for example wool and sheepskin, beef and
hide
Composite supply – when a product can be supplied to more than one market, for example apples for the cider
market or apples for the apple juice market
Recap Task – factors influencing supply
Price of the product: price rise, higher profits, supply rises
Taxes: tax increase, lower profits, supply increases
Subsidies: subsidy increase, higher profits, supply decreases
Costs of production: higher costs, lower profits, supply decreases
Measuring price elasti city of demand (PED)
% change∈quantity demanded
Price elasticity of demand=
% change∈ price
Measures how responsive the demand is to a change in price
The answer is always negative because of the inverse relationship between quantity demanded and price
Percentages
( new value−old value)
Percentage change= ×100
old value
PED
If PED is:
0:
- There is no change – demand is perfectly inelastic
- The demand curve is vertical – there is no change in demand following a price change
- Examples include basic necessities (like water), life saving products (like medicine), addictive
products (like drugs such as cigarettes), habit-forming products (like people who collect items)
Between 0 and -1
- Demand is price inelastic
- % change in demand is smaller than % change in price, demand not very responsive, relatively steep
demand curve
Exactly -1
- Demand has unit or unitary elasticity
- % change in price and quantity are equal
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller tomdew. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £0.00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now