ECO unit1 review:PED

Defination:the responsiveness of the demand for a product following the changing of the price.

PED=0(perfect inelastic)
It tells us whenever the price increase or decrease,the demand for this product doesn`t change.

PED=1 (perfect elastic)(unit elastic)

whenever the demand for a product change,the price of the product doesn`t change

PED:0-1 (inelastic)

From the chart we know if price increase(p3-p2),the retailers gain more....however,if the price fall(p2-p3),retailers lost more.

PED>1(elastic)
if the price increase(p3-p2) retailers lost more,price decrease(p2-p3) retailers gain more.

Formula:PED=%change in demand/%change in price

WHAT WILL AFFECT PED?

1. Any substitutes?
2. Period of time
3. Taste
4. Peak and off-peak demand
5. Income
6. Inflation
7. Economy growth
8. TAX

WHAT IF INCOME GOES UP?

the demand curve might shift to the right from d-d1,the price will increase from p0-p1.