Which condition describes elastic demand?

Which condition describes elastic demand?

• A. |PED| > 1
• B. |PED| < 1
• C. PED = 0
• D. PED = 1

Answer: (A)

Elastic demand is when buyers respond strongly to price changes. The price elasticity of demand (PED) measures this by comparing the percentage change in quantity demanded to the percentage change in price. When demand is elastic, the quantity demanded changes by a larger percentage than the price does, so the absolute value of PED is greater than 1. For example, if price rises by 10% and quantity demanded falls by 20%, PED = -2, and the absolute value is 2, which is greater than 1. This shows a big response to a small price change. The other cases would be inelastic (|PED| < 1), unit elastic (|PED| = 1), or perfectly inelastic (PED = 0).

Elastic demand is when buyers respond strongly to price changes. The price elasticity of demand (PED) measures this by comparing the percentage change in quantity demanded to the percentage change in price. When demand is elastic, the quantity demanded changes by a larger percentage than the price does, so the absolute value of PED is greater than 1. For example, if price rises by 10% and quantity demanded falls by 20%, PED = -2, and the absolute value is 2, which is greater than 1. This shows a big response to a small price change. The other cases would be inelastic (|PED| < 1), unit elastic (|PED| = 1), or perfectly inelastic (PED = 0).