PED | A-Level Economics Notes
These revision notes cover everything you need to know about PED for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What is the formula for PED?
% change in demand/ % change in price
What is the definition of PED?
PED is the responsiveness of demand to a change in price.
What does it mean if PED = 0?
If PED = 0, demand is perfectly inelastic.
This means that, even if the price changes, demand does not change at all.
What does it mean if PED is between 0 to -1?
If PED is between 0 to -1, demand is relatively inelastic.
What does it mean if PED is -1?
If PED is -1, demand is unit elastic.
What does it mean if PED is less than -1?
If PED is less than -1, demand is relatively elastic.
What does it mean if PED is -ထ?
If PED is ထ, PED is perfectly elastic.
What are the factors that affect PED?
SANDPIT
- availability of substitutes
- addictiveness
- necessity
- durability
- the price of the good as a proportion of your income
- time
What is the relevance of PED in terms of a firm's total revenue?
Firms that sell a good or service that is price inelastic in demand can raise prices and their total revenue will increase.
Firms that sell a good or service that price elastic in demand can raise prices but their total revenue will decrease.
Summary questions
- What is the formula for PED?
- What is the definition of PED?
- What does it mean if PED = 0?
- What does it mean if PED is between 0 to -1?
- What does it mean if PED is -1?
- What does it mean if PED is less than -1?
- What does it mean if PED is -ထ?
- What are the factors that affect PED?
- What is the relevance of PED in terms of a firm's total revenue?
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