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Price Elasticity Demand - Coggle Diagram
Price Elasticity Demand
Definition
Price Elasticity Demand
Price elasticity demand is the measure of responsiveness of quantity demanded to a change in price of a product.
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Key points
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Unit elastic
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If price of product increases by 50, then the price of the quantity demand increases by 500, so that the PED equals to 1
Elastic Demand
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If people like both Nike and Adidas, and if the price of Adidas increases, then people will find no problem to switch from Adidas to Nike. Therefore the demand of Adidas will decrease while the quantity of Nike will increase the products to substitute each other.
Inelastic Demand
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A town only has one gas station that sells petrol for $2.00 per liter. If the gas station decides to increase the price of the petrol to $5.00 per liter, then the consumers are forced to buy petrol from that gas station, since there is only one, and the demand will stay the same