| PED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| n | The value of
PED is always negative |
|||||||||||||
| reflecting
the inverse relationship between |
||||||||||||||
| price and
quantity demanded. Second, PED |
||||||||||||||
| is just a
number, it is not expressed in terms |
||||||||||||||
| of any
particular units. |
||||||||||||||
| n | How do we
know whether demand is elastic |
|||||||||||||
| or inelastic? |
||||||||||||||
| – | The rule is:
Demand is price inelastic whenever |
|||||||||||||
| the % change
in price leads to a smaller % |
||||||||||||||
| change in
quantity demanded. This gives PED |
||||||||||||||
| values
between 0 and –1. |
||||||||||||||