Price Elasticity of Demand (PED)
A diagram illustrating different types of price elasticity of demand: perfectly inelastic, perfectly elastic, and unitary elastic demand curves.
perfectly inelastic
Perfectly Inelastic Demand: Vertical line — quantity demanded is completely unresponsive to price (PED = 0).
perfectly elastic
Perfectly Elastic Demand: Horizontal line — consumers will only buy at one price (PED = ∞).
unitary
Unitary Elastic Demand: Downward-sloping curve where total revenue is constant at all points (PED = 1).
The diagram shows three key types of price elasticity of demand, which measure how quantity demanded responds to changes in price.
A perfectly inelastic demand curve is vertical, indicating that quantity demanded does not change at all when price changes (PED = 0).
A perfectly elastic demand curve is horizontal, indicating that consumers are only willing to purchase at one price, and quantity demanded drops to zero if the price changes (PED = ∞).
A unitary elastic demand curve has a constant elasticity of 1, meaning the percentage change in quantity demanded is equal to the percentage change in price.
Understanding elasticity helps firms set prices and helps policymakers predict consumer responses to taxes and subsidies.
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