The law of demand states that as the price of the product increases the quantity demand will fall.
The quantity demanded is also depended on the customers ability and willingness to buy the product or not.
Price elasticity of demand ( PED )
PED measures the Reaction of quantity demanded of a product following change in price
Price elasticity of demand is the ratio of the percentage change in quantity demanded of a product to the percentage change in price
Price Elastic is the static quantity of a good or service when its price changes.
Ans ) Overseas holidays , The customer are the only one who could have the willingness and ability to buy , suppose if the price of a ticket from US to Paris increases , people will start going to other places for holidays as the price may have beaten the ability of the customer to purchase the ticket or the customer has lost interest due to bad reviews or etc.
Calculation of price elasticity of demand
The formula for price elasticity of demand is calculated as , Percentage change in quantity demanded divided by Percentage change in price , %ΔQd / %ΔP
Calculating PED
In a football match the demand of tickets fall from 50,000 to 45,000 match tickets per week if the football club raised the price from $50 to $60 per ticket and demand keeps falling over 45,000 per week , What is the value of price elasticity of demand
Lets calculate the percentage first , 45,000 - 50,000 / 50,000 into 100 , The answer is 10 %
Now lets calculate the percentage of ticket price , 50 - 60 / 110 into 100 , The answer is 20 %
10/20 = - 0.5 %