CHAPTER 2 : Pricing Theories

 

Price Elasticity of Demand (PED) is the responsiveness of quantity demanded to a change in price . It is the percentage change of quantity demanded in response to a one percent change in price. Demand is said to be inelastic where PED is less than one, whereas it is said to be elastic where PED is greater than one.

(((Original Price - New Price) / Original Price) * 100) = % Change in Price

(((Original Quantity Demanded - New Quantity Demanded) / Original Quantity Demanded) *100) = % Change in Quantity Demanded

% Change in Quantity Demanded / % Change in Price = PED

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