Can you make an example of PED
Economics
ScanSolve AI Answer
Step-by-step solution
5 stepsSure, let's look at an example of Price Elasticity of Demand (PED).
Understand the formula for PED.
PED = (% Change in Quantity Demanded) / (% Change in Price)
Consider a scenario.
Suppose the price of a popular brand of coffee increases from $5 to $6 per cup. As a result, the quantity demanded decreases from 100 cups to 80 cups per day.
Calculate the percentage changes.
% Change in Quantity Demanded = ((80 - 100) / 100) × 100% = -20%
% Change in Price = ((6 - 5) / 5) × 100% = 20%Calculate PED.
PED = (-20%) / (20%) = -1
Interpret the result.
The PED is -1. This means the demand for this coffee is unit elastic. A 1% change in price leads to exactly a 1% change in the quantity demanded.
Was this helpful?
Still stuck on this one?
Ask a follow-up, and the answer starts from this question.
Got a different question?Ask your own question