PED

PED

1. definition

   • measures the responsiveness of demand after a change in the goods own price

2. % change in quantity demanded / % change in price

3. PED>1

   • demand responds proportionally to change in price

4. PED<1

   • demand does not change when price changes

5. cost of substituition

   • when these are high demand is inelastic

6. Price ratio to total income

   • %budget is high demand is price sensitive

7. Brand loyalty

   • high levels of this makes it elastic

8. degree of necessity

   • luxuries are optional which means they are inelastic