Price Elasticity of Demand Two types of curves. Price Elasticity
of Demand PED measures the responsiveness of demand to a change in
price. PED Formula % change in QD % change in P Elastic or
inelastic? If goods or services have a PED between 0 and minus 1
they are inelastic. Basically, a big change in price has lead to a
relatively small change in quantity demand. Elastic or inelastic.
If goods or services have a PED which is a greater negative than -1
(so, -1.3, -1.7, -2.4 etc) the goods are elastic. A relatively
small change in price will lead to a larger change in quantity
demand. Price elasticities of demand Oil Beer Cigarettes Cigarettes
(teenagers) Airline flights Fruit shakes Price elasticities of
demand Oil Beer-0.4 Cigarettes-0.2 Cigarettes (teenagers)-0.7
Airline flights-1.5 Fruit shakes-2.2 Factors affecting PED 1. A
good with many substitutes will be elastic. Will it be elastic or
inelastic? A good without substitutes will be inelastic. Will it be
elastic or inelastic? 2. A non-essential good will be elastic.
Addictive goods Will addictive goods be elastic or inelastic? Will
it be elastic or inelastic? 3. If you only spend a small percentage
of your money on the good, then you wont even notice price changes.
They will be inelastic. Why? New York TimesAdidas Boots Annas
soupOil Explain in one or two sentences why each product has such a
different PED. PED and total Revenue Inelastic GoodIncrease
priceTotal Revenue Inelastic GoodDecrease PriceTotal Revenue Unit
Elastic GoodIncrease PriceTotal Revenue Unit Elastic GoodDecrease
PriceTotal Revenue Elastic GoodIncrease PriceTotal Revenue Elastic
GoodDecrease PriceTotal Revenue Please remember never to forget
Price Elasticity of Demand will only ever tell you about changes in
total revenue not profit. Oil In 1973 oil increases in price from
$3 a barrel to $12 a barrel. The demand from the United States fell
from 4.8 million barrels a day to 4.5 million barrels a day.
Calculate the PED of oil in the USA. Football boots The price of
Adidas Predator Boots rises from $150 to $200. The quantity
demanded falls from 500,000 to 250,000. Calculate the Price
Elasticity of Demand for these boots. Soup Anna sells 300 bowls of
organic vegetable soup for 4 a day. She increases the price to
4.50. As a result, she now sells only 270 bowls of soup a day. What
is the PED of Annas organic vegetable soup? New York Times The New
York Times before 2009 sold 1.2 million copies a day. In 2009 the
NYT increased its price from $1.50 to $2.
