Price elasticity of demand and determinants

- Explain the concept of price elasticity of demand, understanding that it involves responsiveness of quantity demanded to a change in price, along a given demand curve.

- Calculate PED using the following equation
**PED= %ΔQd/%ΔP** - State that the PED value is treated as if it were positive although its mathematical value is usually negative.
- Explain, using diagrams and PED values, the concepts of price elastic demand, price inelastic demand, unit elastic demand, perfectly elastic demand and perfectly inelastic demand.
- Explain the determinants of PED, including the number and closeness of substitutes, the degree of necessity, time and the proportion of income spent on the good.
- Calculate PED between two designated points on a demand curve using the PED equation above.

- Explain why PED varies along a straight line demand curve and is not represented by the slope of the demand curve.

Task:

Look at the following list of products and try to place them in the correct order... most inelastic (least responsive to a price change) on top down to most elastic (most responsive to a price change)...

**here**For my short explanation of why elasticity varies along the length of a linear demand curve, you can click this link

__https://docs.google.com/a/aisb.hu/file/d/0B2DnmWBd6LOCbzJzXzNSY2F2UWM/edit__. Also I have posted PAJ Holden's video explanation of all the elasticity topics on

__this page__.

You will be given a copy of the following handout which covers the objectives above (as well as some objectives still to come)... but if you lose it then download and print out...

elasticities.pdf |