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What is meant by the term Elasticity of Demand and where this generally does not apply.
Price elasticity of demand is the measure of the extent of change in market demandfor a good in response to a change in its price.
PED = % of Change in Demand / % of Change in Price
If the PED is equal to zero, the good is perfectly inelastic. A change in price willhave no influence on quantity demanded.
Ref: ACCA F5 Performance Management.
it refers to the relationship between the demand of the product and its price
Elasticity of Demand is defined as the percentage change in the quantity demanded that is caused by1% change in the price of the good.
PED= (% change in quantity demanded) / (% change in price)
Types of Elasticity of demand
1. Perfectly Elastic, when PED is equal to infinitive.
2. Perfectly inelastic, when PED is equal to Zero.
3. Relatively Elastic, when PED is greater than one.
4. Relatively Inelastic, when PED is less than one.
5. Unitary Elasti, when PED is equal to one.
