The formula to calculate PED is:
Price elasticity of demand = % change in quantity demanded / % change is price
We know if:
PED > 1 , the demand is elastic.
PED < 1 , the demand is inelastic.
PED = 1 , the demand is unit elastic.
PED = 0 , the demand is perfectly inelastic
PED = infinity , the demand is perfectly elastic
a) PED = 8% / 10% = 0.8. Thus, demand is inelastic.
b) PED = 3% / 3% = 1. Thus, demand is unit elastic.
c) PED = 5% / 1% = 5. Thus, demand is elastic.
d) PED = demanded collapses to zero / 5% = Infinity. Thus, demand is perfectly ielastic
e) PED = 0% / 5% = 0. Thus, demand is perfectly inelastic
Get Answers For Free
Most questions answered within 1 hours.