Which of the following examples shows the most
a. When the price of printers increases from $800 to $1,000 per printer, sales decreases by 20 percent.
b. When the price of fedoras increases from $90 to $100 per hat, sales decreases by half.
c. When the price of shoes decreases from $60 to $50 per pair, sales increases 5 percent.
d. When the price of crackers decreases from $3 to $2 per box, sales double.
Price elasticity of demand is a measure of degree of responsiveness of the demand for a good to changes in its price.
PED = %age change in Quantity Demanded / %age change in Price
If PED is less than 1, demand is said to be inelastic. If PED is greater than 1, demand is said to be elastic. And PED = 1 is said as unitary elastic demand.
with price of printer increases by 25 %, sales decreases by 20 %, PED = 20/25 = 0.8
with price of fedoras increases by 11.11 %, sales decreases by 50 %, PED = 50/11.11 = 4.5
with price of shoes decreases by 16.67 % ,sales increases by 5 %, PED = 5/16.67 = 0.29
price of crackers decreases by 33.33 % sales rises by 100 %, PED = 100 / 33.33 = 3
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