Price elasticity of demand
What Price elasticity of demand means in Economics B A-Level, as defined for Pearson Edexcel.
Definitions of Price elasticity of demand
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Reference: Pearson Edexcel
Measures the responsiveness of quantity demanded to a change in price, with a numerical value always negative due to the inverse relationship between price and quantity demanded.
Calculated by dividing the percentage change in quantity demanded by the percentage change in price, and is price elastic when the absolute value exceeds 1.
Whether demand is price inelastic, when a business might raise prices to maximise revenue, or elastic, when competitive pricing is often necessitated.
A factor firms must evaluate, alongside anticipated competitor reactions, when finalising their strategic pricing and output decisions.
A measure that differentiation reduces, allowing a business to charge a premium price without losing customers to rivals.
The degree to which demand responds to price, being elastic in mass markets and more inelastic in niche markets.
Topics that use Price elasticity of demand
- Appendix 3: Quantitative skills (Pearson Edexcel A-Level)
- Competing on price (Pearson Edexcel A-Level)
- Price elasticity of demand (PED) (Pearson Edexcel A-Level)
- Price mechanism (Pearson Edexcel A-Level)
- The competition (Pearson Edexcel A-Level)
Related terms
- Pricing strategies
- Profit maximisation
- Base year
- Branding
- Capacity utilisation
- Competitive advantage
- Cost-plus pricing
- Cross elasticity of demand
Using Price elasticity of demand in the exam
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