Exam Frequency Analysis
Past paper frequency (2018 to 2024)
This topic accounts for approximately 15% of your exam marks.
increasing
Very High
Increasing15%
PED definition, formula, calculation, and revenue application appear regularly; trending upward since 2021.
Demand can be sorted into five categories based on |PED|. Only the middle three appear in practical exam questions; the two extremes are theoretical.
| Category | Value of |PED| | What it means | Typical example |
| --- | --- | --- | --- |
| Perfectly inelastic | 0 | Qd does not change at all when price changes | A life-saving heart transplant (an extreme, theoretical case) |
| Relatively inelastic | 0 < |PED| < 1 | %ΔQd is smaller than %ΔP | Essential medicines, basic food, addictive products |
| Unitary (unit) elastic | |PED| = 1 | %ΔQd equals %ΔP | Knife-edge case; total revenue does not change |
| Relatively elastic | |PED| > 1 | %ΔQd is larger than %ΔP | Luxury goods, branded products with many substitutes |
| Perfectly elastic | ∞ | Any price rise wipes out demand entirely | Theoretical only |
The two values that matter on the exam: less than 1 = inelastic; greater than 1 = elastic. Memorise that and you can answer most PED questions in seconds.
Exam tip
Interpreting a PED value
What comes up: a question gives a PED value (e.g. −2.0, −0.3, 1) and asks what it tells us about demand or revenue.
Write: (1) compare the absolute value to 1: if |PED| > 1 the percentage change in quantity demanded is larger than the percentage change in price, so demand is price-elastic; if |PED| < 1, the percentage change in quantity demanded is smaller, so demand is price-inelastic; if |PED| = 1 it is unit elastic and total revenue is unchanged. (2) Connect to revenue: a firm with inelastic demand can raise price to increase total revenue; a firm with elastic demand would lose revenue by raising price.
Watch out: PED for a normal good is always negative (price and quantity move in opposite directions), but the elastic/inelastic classification is based on the absolute value — |PED| = 2 is more elastic than |PED| = 0.5, regardless of the minus sign. Do not write "PED is −0.5 so it is elastic because the value is small."