🎓 Understanding Price Elasticity of Demand (PED) – Full Guide with Short Videos
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In this post, we’ll explore the complete concept of Price Elasticity of Demand (PED), broken down into three easy parts with short videos and exam-friendly notes.
Each section includes:
🎬 A brief video for visual explanation
📝 Written pointers for quick revision
📌 Part 1: Introduction to Price Elasticity of Demand (PED)
🎬 Video:
📝 Notes:
Definition:
PED measures the responsiveness of quantity demanded to a change in price.
In simple words:
It shows how sensitive buyers are when the price of a product changes.
Formula:PED = (% Change in Quantity Demanded) / (% Change in Price)
Key points:
Quantity Demanded = Dependent Variable
Price = Independent Variable
Percentage Change Formula:Percentage Change = ((New Value - Original Value) / Original Value) * 100
Types of PED (Just names and values):
- Elastic Demand → PED > 1
- Inelastic Demand → PED < 1
- Unitary Elastic Demand → PED = 1
- Perfectly Elastic Demand → PED = ∞
- Perfectly Inelastic Demand → PED = 0
📌 Part 2: Elastic and Inelastic Demand
🎬 Video:
📝 Notes:
Elastic Demand (PED > 1)
Demand is highly responsive to price changes
Flatter demand curve
A small price rise → large fall in quantity demanded
Example:
If Honda reduces price, Toyota customers may switch quickly
Movement along curve: Contraction (from A to B)
Inelastic Demand (PED < 1)
Demand is less responsive to price changes
Steeper demand curve
Price increase → small fall in quantity demanded
Example:
People still buy flour even if the price increases — it's a necessity
Movement along curve: Contraction (from A to B)
📌 Part 3: Extreme Cases of PED
🎬 Video:
📝 Notes:
Perfectly Elastic Demand (PED = ∞)
Even a tiny price rise → quantity demanded drops to zero
Perfectly horizontal demand curve
Seen in perfect competition with identical products
Firms are price takers — any price increase loses all customers
To earn more, firms must sell more, not raise prices
Perfectly Inelastic Demand (PED = 0)
Price changes have no effect on quantity demanded
Perfectly vertical demand curve
Common for essential goods like life-saving drugs
Firms can raise prices and still sell the same quantity
Example: Insulin
Unitary Elastic Demand (PED = 1)
Equal percentage change in price and quantity demanded
Price ↑ 10% → Quantity ↓ 10%
Total Revenue stays constant
Demand curve is a rectangular hyperbola
Useful when firms want stable revenue
✅ Final Wrap-Up
You should now be confident with all five types of PED:
- Elastic Demand (PED > 1)
- Inelastic Demand (PED < 1)
- Perfectly Elastic Demand (PED = ∞)
- Perfectly Inelastic Demand (PED = 0)
- Unitary Elastic Demand (PED = 1)
📍 These concepts are crucial for exams and help explain real-world business and pricing decisions.
🙌 Don’t Forget!
🎬 Watch the short videos for visual memory.
💬 Comment below if you have any questions or suggestions.
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