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Price elasticity of demand
is defined as the responsiveness
of quantity demanded to a change in price,
ceteris paribus.
Now what does that mean?
Simply, when price changes,
by what proportion does your quantity demanded change?
Phrased another way,
the responsiveness of quantity demanded
to a change in price. ceteris paribus.
Simple. So let’s look here.
When we have a demand curve,
when price increases by 20%,
quantity demanded decreases by 200%.
So what is the PED? 10?
Because I know uh, 200 divided by 20.
Wrong! Because it's -10,
because 200...
-200 divided by 20.
So uh it's negative 10 because
quantity demanded and, and the price
moves in opposite directions.
Ceteris paribus is just latin for
keeping all others constant.
So urm, you can only talk about PED
when only your price or your quantity changes.
You can talk about some other factors
that changes your whole demand curve.