hinnavahemikust

Hinnavahemikust, also known as price elasticity of demand, is a fundamental concept in economics that measures the responsiveness of the quantity demanded of a good or service to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The formula for price elasticity of demand (PED) is:

PED = (% change in quantity demanded) / (% change in price)

Price elasticity of demand can be categorized into three main types based on its value:

1. Elastic demand: When the absolute value of PED is greater than 1, demand is considered elastic. This means that a small change in price leads to a relatively large change in quantity demanded. For example, luxury goods often have elastic demand.

2. Inelastic demand: When the absolute value of PED is less than 1, demand is considered inelastic. This means that a change in price results in a relatively small change in quantity demanded. For example, necessities like salt or basic medical care often have inelastic demand.

3. Unit elastic demand: When the absolute value of PED is equal to 1, demand is considered unit elastic. This means that the percentage change in quantity demanded is equal to the percentage change in price. For example, some basic consumer goods like coffee or soft drinks may have unit elastic demand.

Price elasticity of demand is influenced by several factors, including the availability of substitutes, the necessity of the good, and the time period considered. It is a crucial concept in pricing strategies, as businesses use it to determine how changes in price will affect their sales and revenue.