# Price Elasticity of Demand

Price Elasticity of Demand (PED) is a measure of the responsiveness of quantity demanded to changes in the price of a good or service. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

1. Perfectly Elastic Demand: A perfectly elastic demand curve is a horizontal line, indicating that any increase in price will cause the quantity demanded to drop to zero, and any decrease in price will cause the quantity demanded to increase to infinity. The PED for a perfectly elastic demand curve is infinite, meaning that any change in price will lead to an infinitely large change in the quantity demanded.
2. Perfectly Inelastic Demand: A perfectly inelastic demand curve is a vertical line, indicating that the quantity demanded is completely unaffected by changes in price. The PED for a perfectly inelastic demand curve is zero, meaning that changes in price have no effect on the quantity demanded.
3. Unitary Elastic Demand: A unitary elastic demand curve has a PED of 1, meaning that a change in price leads to an equal percentage change in quantity demanded. This is also known as unit elasticity.
4. Relatively Elastic Demand: A relatively elastic demand curve is flatter, indicating that a small change in price leads to a larger percentage change in quantity demanded. The PED for a relatively elastic demand curve is greater than 1, indicating that a small change in price leads to a relatively larger change in quantity demanded.
5. Relatively Inelastic Demand: A relatively inelastic demand curve is steeper, indicating that a change in price leads to a smaller percentage change in quantity demanded. The PED for a relatively inelastic demand curve is less than 1, indicating that a change in price leads to a relatively smaller change in quantity demanded.

Overall, the value of PED can help businesses and policymakers understand how changes in price will affect the quantity demanded of a good or service and can inform decisions about pricing strategies and taxation policies.

### 1 Response

1. March 10, 2023

[…] Price Elasticity of Demand (PED): This measures the responsiveness of quantity demanded to changes in the price of a good or service. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A good or service is considered to be elastic if its PED is greater than 1, which means that a small change in price leads to a large change in quantity demanded. Inelastic goods or services have a PED less than 1, which means that a change in price leads to a relatively small change in quantity demanded. […]