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Price elasticity of demand - Coggle Diagram
Price elasticity of demand
Equation:
% change in quantity demand / % change in price
Types of price elasticity
Price Elastic Demand
The % change in price is proportionally more then the % change in quantity demanded
PED= >-1.0
Demand curve is slightly horizontal (dependent on the level of PED
Price Inelastic Demand
The % change in price is proportionally less then the % change in quantity demanded
PED = <-1.0>-0.0
Demand curve is slightly vertical (depending on the level of PED
Perfect Price Elasticity of Demand
The % change in quantity demanded causes no change in the price level
PED = infinity
Demand curve is completely horizontal
Perfect Price Inelastic Demand
The % change in price causes no change in quantity demanded
PED = -0
Demand curve is completely vertical
Definition:
Measures the response of quantity demanded to a change in price
Factors affecting Price Elasticity of Demand
If the good is a habit forming good
If the purchase of the good can be postponed
If the good is a need (essential) or a want (luxury) good
The time period that the product is needed