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The pricing decision

The price elasticity of demand

The price elasticity of demand measures the change in demand as a
result of a change in its price. It can be calculated as follows:

Change in quantity demanded, as a % of demand
Price elasticity of demand = –––––––––––––––––––––––––––––––––––––––
Change in price, as a % of the price

Illustrations and further practice

Now read the illustration ‘Interpretation of PED’ from Chapter 8, and attempt
example 1, ‘Elasticity’.

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