• Determinants Of PED

  • Substitution - This is the key determinant of the PED for a good or service. In general, the greater the number and availability of close substitutes there are for a good or service, the higher the value of its PED will tend to be.

  • Income - The proportion of a consumer’s income that is spent on a product also affects the value of its PED. By contrast, if the price of an overseas cruise holiday were to rise by 25% from $10,000 to $12,500 per person, this would discourage many customers because the extra $2,500 per ticket has a larger impact on a person’s disposable income

  • Habits, addictions, fashions and tastes — If a product is habit forming (such as tobacco) or highly fashionable, its PED tends to be relatively price inelastic. Similarly, people who are extremely devoted to a particular hobby (such as sports or music) are more willing to pay

Sales Revenue

• Sales revenue is the amount of money received by a supplier from the sale of a good or service

• It is calculated by multiplying the price charged for each product by the quantity sold :

• Sales revenue = price × quantity demanded