Measures how sensitive consumers are to changes in the price of a good or service.

Quantity demanded is highly responsive to price changes.

Quantity demanded is not very responsive to price changes.

Quantity demanded does not change regardless of price changes (Ed = 0).

Quantity demanded is infinitely responsive to price changes (Ed = ∞).

Quantity demanded changes proportionally to price changes (Ed = 1).

The amount of money a business brings in from sales: TR = P * Q.

Describes consumers whose quantity demanded changes drastically with price changes.

A numerical representation of the price elasticity of demand, calculated as (% Change in Quantity Demanded) / (% Change in Price).

Demand where the price elasticity of demand coefficient is between 0 and 1 (0 < Ed < 1).

Elastic demand means consumers are highly responsive to price changes, while inelastic demand means they are not very responsive.

Perfectly elastic demand means any price increase will cause quantity demanded to fall to zero, while perfectly inelastic demand means quantity demanded will not change regardless of price.

PED is based on percentage changes in price and quantity, while the slope is based on absolute changes. PED can vary along a straight-line demand curve, while the slope remains constant.

Under elastic demand, a price increase will decrease total revenue. Under inelastic demand, a price increase will increase total revenue.

Demand tends to be more inelastic in the short run because consumers have less time to adjust their consumption habits. Demand tends to be more elastic in the long run as consumers find substitutes or change their behavior.

A tax on goods with elastic demand will lead to a larger decrease in quantity demanded and less tax revenue compared to a tax on goods with inelastic demand.

Necessities tend to have inelastic demand, while luxuries tend to have elastic demand.

Unit elastic demand means the percentage change in quantity demanded equals the percentage change in price, while relatively elastic demand means the percentage change in quantity demanded is greater than the percentage change in price.

Under elastic demand, consumers will see a larger decrease in price from a subsidy. Under inelastic demand, consumers will see a smaller decrease in price.

PED measures the responsiveness of quantity demanded to a change in the price of the same good, while cross-price elasticity measures the responsiveness of quantity demanded to a change in the price of a related good (substitute or complement).

Firms use PED to determine whether raising prices will increase or decrease total revenue.

If demand is elastic, discounts can significantly increase quantity sold and overall revenue.

More substitutes generally lead to more elastic demand, as consumers can easily switch to alternatives if the price increases.

Total revenue increases because the decrease in quantity demanded is proportionally smaller than the increase in price.

If demand is more inelastic than supply, consumers bear a larger burden of the tax. If demand is more elastic than supply, producers bear a larger burden.

If demand is inelastic, a supply shock will lead to a larger change in price than if demand is elastic.

Luxury goods typically have more elastic demand because they are not necessities and consumers can easily forgo them if prices rise.

Essential goods tend to have inelastic demand because consumers need them regardless of price changes.

By understanding the PED of their products, businesses can predict how changes in price will affect the quantity they sell.

If demand is inelastic, the government can raise more revenue from excise taxes without significantly reducing the quantity demanded.