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This lesson covers the final part of AQA A-Level Business topic 3.3.2 — price elasticity of demand (PED) and income elasticity of demand (YED). You will learn how to calculate and interpret elasticity, understand the factors that determine it, and evaluate its significance for business decision-making.
Key Definition: Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It tells businesses how sensitive their customers are to price changes.
PED = % change in quantity demanded / % change in price
PED is almost always negative because of the inverse relationship between price and quantity demanded (the law of demand). However, by convention in business studies, PED is often expressed as a positive number (the absolute value).
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