Describe with a real world example, price elasticity of demand

Price elasticity of demand (PED) is a measure used to show the responsiveness of the quantity demand of a good to a price change and is generally expressed in percentages. This is extremely important for firms when forecasting demand changes given pricing decisions or for governments intending to reduce consumption of demerit goods. Over the last 30 years, the British government has attempted to reduce smoking rates, and thus have implemented VAT taxes on cigarettes. However given that cigarettes are very inelastic goods, meaning %change in QD of a 1% increase in price would be between 0 and -1, relatively the tax increases have not had a huge impact on decreasing consumption of the good. On the other hand, increasing prices of an elastic good, such as apples, would have a great impact on the quantity demanded of the good. 

DJ
Answered by Dylan J. Economics tutor

18197 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Why should the government consider the price elasticity of demand when imposing tax on goods?


Explain the term Economies of Scale. You may use a diagram to help.


What is the main government objectives to maximize economic growth?


What are the main causes of unemployment in the UK? CCEA 2013 Summer paper 2


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning