Price Elasticity of Demand (PED)
Measure of how sensitive quantity demanded is to price changes.
Formula
PED = % change in quantity demanded ÷ % change in price
Real World
Insulin has a highly inelastic demand — when prices surged in the USA, diabetic patients continued buying because there is no substitute, illustrating PED close to zero.
Exam Focus
PED is always negative for normal goods — quote the absolute value when comparing elasticity, and always show your calculation workings.
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