Basics of Price Elasticity of Demand

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Elastic Demand

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PED > 1

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Inelastic Demand

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PED < 1

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Unitary Elasticity

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PED = 1

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Perfectly Elastic

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PED = ∞

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Perfectly Inelastic

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PED = 0

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True or False?

Economists always include the negative sign when presenting the answer in a price elasticity of demand calculation.

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False.

Economists usually do not include the negative sign when presenting the answer in a price elasticity of demand calculation. This is due to the fact that the answer is always negative, and the absolute value is used for analysis.

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What is meant by the term total revenue?

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Total revenue is the amount of money a firm receives from selling its goods or services.

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Necessity Goods

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Inelastic demand

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Luxury Goods

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Elastic demand

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What is price elasticity of demand (PED)?

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Price elasticity of demand reveals how responsive the change in quantity demanded is to a change in price.