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Price Elasticity of Demand (PED) - Coggle Diagram
Price Elasticity of Demand (PED)
Definition
a numerical measure of the responsiveness of the quantity demanded to the change in price of the product.
Formula
PED = (% change in quantity demanded of a product) / (% change in price of the product)
5 key values
PED = 1
Unit Elastic
Where the change in price is relatively the same as the change in quantity demanded
PED > 1
Elastic
Where the relative change in quantity demanded is greater than the change in price
PED is between 0 and 1
Inelastic
Where the relative change in demand is less than the change in price
PED = infinity
Perfectly Elastic
Where all that is produced is sold at a given price
PED = 0
Perfectly Inelastic
Where a change in price has no effect on the quantity demanded
Factors affecting the value of PED
The relative expense of the product
Time
The range of attractiveness of substitutes