If price increases by 5% and the quantity demanded reacts by fallingby 10%, the demand for that product should be classified into whichcategory of PED?
Question
Solution 1
The Price Elasticity of Demand (PED) is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the quantity demanded falls by 10% when the price increases by 5%.
So, the PED = -10% / 5% = -2.
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