Price Elasticity of Demand
Price elasticity of demand (PED) measures the responsiveness of quantity demanded to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. PED shows whether demand is elastic (responsive to price) or inelastic (unresponsive to price).
Real World
When petrol prices spiked in 2022, UK drivers cut consumption by only around 5% despite a 30% price rise, showing highly inelastic demand because most commuters have no immediate substitute.
Exam Focus
Always state whether PED is elastic or inelastic and explain why — just quoting the formula without application scores poorly.
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