Business – 8.1 Marketing analysis – Elasticity | e-Consult
8.1 Marketing analysis – Elasticity (1 questions)
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Answer:
Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price.
The standard formula is:
PED = (% change in quantity demanded) ÷ (% change in price)
Interpretation of values:
- Elasticity > 1: Demand is price‑elastic; a 1 % change in price leads to a greater than 1 % change in quantity demanded. Consumers are highly responsive to price changes.
- Elasticity = 1: Demand is unit‑elastic; a 1 % change in price results in exactly a 1 % change in quantity demanded.
- Elasticity < 1: Demand is price‑inelastic; a 1 % change in price causes a less than 1 % change in quantity demanded. Consumers are relatively insensitive to price changes.