In my school we have the subject economics and we talked about the PED (price elasticity of demand). But I didn't really understand what it means and what it is for.
It would be very nice of you if you could explain it to me (but please in simple english, 'cause I'm from Germany).
Thanks!
2007-02-12 09:48:36 · 6 answers · asked by Mademoiselle 4 in Social Science ➔ Economics
For my homework in economics I had to calculate the PED for two different goods.
For good 1 I the PED was -0.416 and for the second good it was -2.8. What does it mean? That the PED for the second one is high?
2007-02-12 09:59:01 · update #1
Price Elasticity of Demand is used to measure how much demand changes if there is a change in price.
The formula used to calculate this is:
% change in demand / % change in price
This always gives a negative figure because when prices rise, demand falls so ignore the sign and look at the magnitude of the figure.
If the PED is greater than 1, this means the good is elastic and a change in price will lead to an even greater change in demand.
There will be many people who stop buying the good if the price goes up.
If the PED is less than 1, this means the good is inelastic and a change in price will lead to a quite small change in demand. Most people will continue to buy the good despite the price rise.
If PED is exactly 1, this is called unitary elasticity. This means that change in demand is exactly proportionate to change in price. This is a theoretical value of PED.
Other theoretical extremes include PED = 0 when a good is perfectly inelastic so people will buy the good no matter what. Also, if PED is infinite, the good is perfectly elastic so if the price changes at all, nobody will buy the good anymore.
2007-02-12 10:05:34 · answer #1 · answered by Peter 2 · 1⤊ 0⤋
The PED is the slope of the demand curve. The demand curve slopes downward so it is always negative. PED near 0 would be an almost horizontal line, so you would demand/consume nearly the same amount , no matter the price (drinking water). PED=1 would mean you spend the same amount no matter the price, that is you budget entertainment so it movies tickets go up you see fewer movies.
2007-02-12 12:22:23 · answer #2 · answered by meg 7 · 0⤊ 0⤋
PED means the relative variation of the demand with a variation of prices. The question here is: How will affect a variation of the price of a good on his demand??
Exemple: if a price of a good increase 10%, his demand decrease by 15%. This good is surely very elastic, because his demand is directly affected by the change of his price. This could be an exemple of a luxury good.
I can give u another exemple where the good is not elastic: primary goods (bread, food...) if it's price increase by 10%, it will not affect the demand because the good here is a primary good.
2007-02-12 10:04:02 · answer #3 · answered by loulou 2 · 0⤊ 0⤋
PED tells the type and degree of a relationship between changes in the amount demanded of a good and the changes in its price
2007-02-12 09:53:39 · answer #4 · answered by Zoomba 2 · 0⤊ 0⤋
If they don't release the list, then more and more fans are going to eventually assume that the reason they're not releasing the list is because Pujols is on there. Baseball would be in HUGE trouble if it's found out that Pujols is juiced. I know about the promises, but MLB also promised Pete Rose that there would be no finding that he'd bet on baseball when he was suspended. What, baseball's never broken a promise to anyone? Just release the names already, we all know baseball's been a phony sport for at least the last 10-15 years anyway....
2016-03-29 03:55:52 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Price elasticity of demand deals with how the quantity demandes of a product changes with its price change. Technically it is % change in price/ % change in demand. If The price changes very little, and the demand changes alot, then the good is very elastic. If the price changes alot, and the demand changes very little, the price is very inelastic. The good is inelastic if it is < 1, and it is elastic if it is > 1. Airplane tickets are very elastic, but a good like pepsi is not.
From about.com: "measures the rate of response of quantity demanded due to a price change."
2007-02-12 10:09:04 · answer #6 · answered by captainchopps 1 · 0⤊ 0⤋