PED & YED

PED & YED

1. PED = % Change in quantity / % Change in price

   • PED = Price Elasticity of Demand
   • This tells you if the product is able to do well if it is priced differently
   • It tells you how much the product is demanded, depending on how the price has changed

2. YED = % Change in quantity / % Change in price

   • YED = Income Elasticity of Demand
   • This tells you how well the product will do at different income levels
   • It tells you how much the product is demanded, depending on how the customers income has changed.

3. Both of these are expressed as a decimal and not a percentage

4. If the PED is between 0 and 1 then the product is inelastic.

5. This is how PED / YED is shown on a graph

6. If the YED value is 0 then the product is a necessity good

7. If the YED value is between 0 and 1 then the product is a normal good

8. If the YED value is greater than one then the product is a superior good

9. If the PED is bigger than one or smaller than negative one then the product is elastic

10. Factors influencing PED

    • Availability of substitutes
    • Luxury or necessity good
    • Boght at short intervals or long intervals
    • Willingness of consumer to try new brands (habit forming goods)
    • How much people earn

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