Learning objectives
Define price elasticity of demand and calculate PED = %ΔQd ÷ %ΔP, interpreting its sign and size
Describe perfectly elastic, elastic, unitary, inelastic and perfectly inelastic demand and sketch each case
Explain why PED varies along a straight-line demand curve even though its slope is constant
Explain the factors affecting PED: closeness of substitutes, share of income, necessity or luxury, habit and the time period
Analyse how PED links a price change to total expenditure (total revenue), and apply PED to pricing and tax decisions by firms and governments
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