#economics

Price Elasticity of Demand (PED)

It measures how much the quantity demanded of a good changes when its price changes.

• If a small price change causes a big change in how much people buy, demand is elastic.

• If a price change causes little or no change in how much people buy, demand is inelastic.

Formula:

• PED > 1 → Elastic (people are sensitive to price)

• PED < 1 → Inelastic (people aren’t very sensitive)

• PED = 1 → Unit elastic (proportional change).

Examples:

• Elastic goods: Luxury items, soft drinks, restaurant meals

  You’ll probably skip them if prices go up.

• Inelastic goods: Gasoline, medicine, basic groceries

  You’ll still buy them even if they get pricier.