1.2 Elasticity (PED)

Formula for PED: (percent change in [blank_start]quantity demanded[blank_end]) / (percent change in [blank_start]price[blank_end])

PED is usually positive.

The value of PED depends on the degree of customers' ability and willingness to pay.

Label the 3 types of PED graphs below.

PED Values: Unit Elastic = [blank_start]1[blank_end] Perfectly Price Elastic = [blank_start]Infinity[blank_end] Perfectly Price Inelastic = [blank_start]0[blank_end] Price Inelastic = [blank_start]low[blank_end] (low or high) Price Elastic = [blank_start]high[blank_end] (low or high)

Which are determinants of PED?

Total Revenue When price increases, total revenue [blank_start]increases[blank_end] for price inelastic goods and [blank_start]decreases[blank_end] for elastic goods. When price decreases, total revenue [blank_start]decreases[blank_end] for price inelastic goods and [blank_start]increases[blank_end] of elastic goods. In both cases, total revenue [blank_start]remains unchanged[blank_end] for unitary goods.