Price Elasticity of Demand (PED)
It measures how much the quantity demanded of a good changes when its price changes.
If a small price change causes a big change in how much people buy, demand is elastic.
If a price change causes little or no change in how much people buy, demand is inelastic.
Formula:
PED > 1 → Elastic (people are sensitive to price)
PED < 1 → Inelastic (people aren’t very sensitive)
PED = 1 → Unit elastic (proportional change).
Examples:
Elastic goods: Luxury items, soft drinks, restaurant meals
You’ll probably skip them if prices go up.
Inelastic goods: Gasoline, medicine, basic groceries
You’ll still buy them even if they get pricier.