Drawing and interpretation of demand curve diagrams to show different PED

📈 Price Elasticity of Demand (PED)

What is PED?

Price Elasticity of Demand measures how much the quantity demanded of a good changes when its price changes.

Formula: PED = \$\frac{\% \Delta Q_d}{\% \Delta P}\$

Interpretation:

• Elastic demand – PED > 1 (quantity changes a lot)
• Unit‑elastic demand – PED = 1 (quantity changes proportionally)
• Inelastic demand – PED < 1 (quantity changes little)

Drawing Demand Curves

In a demand diagram:

• Vertical axis = Price (P)
• Horizontal axis = Quantity (Q)
• Demand curves slope downwards (negative relationship)

Different slopes show different elasticities:

• Flatter curve – Elastic demand (price changes a lot, quantity changes a lot)
• Steeper curve – Inelastic demand (price changes a lot, quantity changes little)
• Intermediate slope – Unit‑elastic demand

Examples of Goods

• Luxury cars – elastic (people can postpone buying)
• Salt – inelastic (tiny price change, quantity hardly changes)
• Smartphones – unit‑elastic (moderate price sensitivity)

Diagrammatic Representation

Analogy: Elastic vs. Inelastic

Think of a rubber band:

• Stretch it a little – it returns quickly (elastic demand)
• Stretch it a lot – it resists and stays stretched (inelastic demand)
• Stretch it just enough to keep it the same length – unit‑elastic demand

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