1. What is it?
1.1. PED is the way a product will react to an increase in price, therefore loosing demand or not at all.
2. Types of Elasticity
2.1. Products vary in elasticity due to their circumstances. When products are very responsive they are PRICE ELASTIC, and when they are not responsive the are PRICE INELASTIC.
3. Formula
3.1. Percentage change in queantities demanded / Percentage change in price
3.1.1. Percentage change = ((FV - IV) / IV) x 100
3.1.2. PED < 1 : INELASTIC
3.1.2.1. The demand curve will be quite steep
3.1.3. PED > 1 : ELASTIC
3.1.3.1. The demand curve will be quite horizontal
3.1.4. PED = 1 : UNIT ELASTIC
3.1.4.1. The demand will be a curve, literally
3.1.5. PED = 0 : PERFECLTY INELASTIC
3.1.5.1. Vertical Demand curve
3.1.6. PED = INFINITY : PERFECTLY ELASTIC
3.1.6.1. Horizontal demand curve
4. Determinants of price elasticity of demand
4.1. Number of substitutes
4.1.1. The more substitutes a product has, the more elastic it will be
4.2. Closeness of substitutes
4.2.1. The closer that a product has a similar one, the more elastic it will be.
4.3. Necessities vs Luxuries
4.3.1. Luxuries will be more elastic than necessities
4.4. Length of time
4.4.1. The longer you wait for a purchase the more elastic the product will be
4.5. Proportion of income spent
4.5.1. A product that occupies the least amount of your income will be the more inelastic