Price elasticity of demand measures the responsiveness of demand for a good or service when there is a change in the price.
The key word there is responsiveness, all of your elasticity definitions must include the word responsiveness.
In short, PeD tells us, when there is a change in price, measured by %, will demand change by a bigger or smaller %?
The formula for price elasticity of demand can be seen below.
The key word there is responsiveness, all of your elasticity definitions must include the word responsiveness.
In short, PeD tells us, when there is a change in price, measured by %, will demand change by a bigger or smaller %?
The formula for price elasticity of demand can be seen below.
Elasticity Diagrams
The PeD can be represented within your supply and diagrams through the steepness, or gradient, of the demand curve. The two diagrams below show these differences. Note the difference to the consumer and producer surplus in each diagram.
Elastic PeD
Elastic PeD
|
Inelastic PeD
Inelastic PeD
|
