Price Elasticity of Demand
Definition
A measure of the responsiveness of quantity demanded to a change in the price of the good. Formula: PED = % Change in Quantity Demanded / % Change in Price. If |PED| > 1, demand is elastic; if |PED| < 1, it is inelastic.
Example
"If price rises by 10% and demand falls by 20%, PED = −20/10 = −2 (elastic). Luxury cars exhibit elastic demand while essential medicines exhibit inelastic demand."