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DEMAND
Meaning:
Price elasticity of demand is a measure of the responsiveness of the demand for a good to Change in it’s
price, We know that demand and price are inversely related. For some goods The demand changes
considerably even for a small change of price. On other hand , there are some goods for which the
demand is not affected much by price change.
It is calculated by dividing the percentage change in demand by the percentage change in price .
PED= %change in demand for a good / % change in the price of good.
OR
PED=. ∆q/∆p×p/q
Here,. ∆p=change in price
∆q=change in quantity demanded
P= initial price
Q=initial quantity demanded.
CLASSIFICATION OF PRICE
ELASTICITY OF DEMAND
• 1. Perfectly elastic demand:
If the price elasticity of demand is unlimited or infinite(PED= ~),than it is
called perfectly elastic demand. In this case , a very small change in price
leads to an infinite change in demand . Hear, the demand curve (DD) is
horizontal.