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### 11 Cards in this Set

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 Price elasticity of Demand a measure of the magnitude by which consumers alter the quantity of some product they purchase in response to a change in the price of that product. The more price-elastic demand,the more responsive the consumers are to price changes PED Equation %∆QD/%∆P Elastic Demand ed > 1 Unit-elastic demand ed = 1 Inelastic demand 0 < ed < 1 Perfectly Elastic Demand Curve A horizontal demand curve indicating that consumers can and Will purchase all they want at one price Perfectly Inelastic Demand Curve A vertical demand curve indicating that there is no change in the quantity demanded as the price changes Why is Price Elasticity of Demand defined in percentage terms? To avoid ignoring the fact that different type of goods/service have different values ex: comparing apples to apples VS. comparing apples to oranges 3 Determinants of PED -The existence of substitutes -The importance of the product in the consumer’s total budget -The Time Period Under Consideration Total Revenue Price of good or service X Quantity sold Inelastic demand = TR▲ as price▲ Inelastic demand = TR▼ as price▲ Unit-elastic demand = No ∆ Price Discrimination charging different customers different prices for the same product