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Price elasticity of Demand 1.2.3 - Coggle Diagram
Price elasticity of Demand 1.2.3
measures the responsiveness of demand of a product following a change in its price
% change in quantity demanded / % change in price
Quacking ducks on a pond
PED always negative
0 demand is perfectly inelastic
infinite demand is perfectly price elastic
<1 demand is price inelastic
1 demand is unit price elastic
demand changes at the same amount as price change
>
1 demand is elastic
elastic
change in price results in a large change of demand
inelastic
a change in price results in a minimal change in demand
PED curves
SPLAT
S
ubstitute
more substitutes the more price elastic
P
ercentage of income
the greater percentage income a price change takes the more price inelastic
e.g. 1-% increase in apple compared to cars is 5p compared to 2k
T
ime period
short run- inelastic not enough time to look for substitutes
long run-elastic as ore substitutes become available
L
uxury/necessity
luxury- elastic, necessity- inelastic
A
ddictive
inelastic