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Economics explained
Category:
Elasticity
Elastic demand
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Elastic demand
Demand is said to be price elastic if there is a relatively large change in the quantity demanded of a product following a change in its price: that is, buyers are very responsive to changes in price.
If the PED for a product is greater than 1 (ignoring the minus sign), then demand is price elastic.
This is because the percentage change in quantity demanded is larger than the percentage change in the price of the product
Demand is elastic between points a and b.
A rise in price from $4 to$5 causes a proportionately larger fall in quantity demanded: from 20 units to 10 units.
Total expenditure falls from $80 (the blue area) to $50 (the pink area).
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