Elasticity (PED) YAANMENG

In this blog post, I'm going to talk about elasticity, more focused on the price elasticity on demand.

Elasticity is a measure of responsiveness. It measures how much something changes when there is a change in a factor that determines it.
Price elasticity of demand [PED] is the measurement of how much the quantity demanded of a product changes when there is a change in the price of the product. It is calculated by the following equation :
PED = [Percentage change in quantity demanded of the product]/[Percentage change in price of the product]
If the PED is equal to zero, the change in price of a product would have no effect on the quantity of demand.

Normal products have values of PED between 0 and infinity, the range of values are usually split into three categories. Inelastic demand, elastic demand, and unit elastic demand are the three categories and I will be using some examples of our everyday life to show what they mean.

Inelastic goods are goods whose value of PED is less than one and greater than zero. If a product or a good is inelastic, a change in its price would not affect its’ quantity demanded very much. A good example of an inelastic good is oil, in other words, petrol for vehicles. When the price of petrol rises, people who own vehicles would still pay for the petrol because it is a necessity to them to get around. When the price of petrol drops, the quantity demanded for petrol does increase but not by a great deal, this is because a drop in price of petrol does not mean that people would buy cars to use the petrol. Thus we can see how petrol is an inelastic good as the quantity demanded for it is roughly the same even when the price increases or decreases. An example of an inelastic good in my life is the canteen food in ACS (International), no matter how horrid it maybe I would still have to eat it if not I will starve and not be able to pay attention in class. I also have no control over the price of the food, and since there are no substitute canteens in the school, I have no choice but to buy from them regardless of the price.

Elastic goods are goods that have a value of PED greater than one and less than infinity, basically the opposite of inelastic goods. Thus if the price is changed, raised or drops, the quantity demanded would be affected a lot more in comparison with an inelastic good. An example of an inelastic good in my everyday life would be the cyber cafes and lan shops. If the price of the cyber cafes increased from $2 to $2.50 per hour, I would search for other cyber cafes which offer a cheaper price, because there are many shops thus more substitutes to the cyber cafe that raised its prices. However, if the price lowers from $2 to $1.50 per hour, I would still go to that same cyber cafe as it is cheaper.

Lastly, unit elastic demand, these are goods that has a PED value of one. If a good has unit elastic demand, then a change in its price would lead to a proportionate, opposite, change in the quantity demanded for it. I have no idea for an example of this, so I will wait until Ms. Vyna goes through it!