Allocation of Resources · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 15% of your exam marks.
PED definition, formula, calculation, and revenue application appear regularly; trending upward since 2021.
Price elasticity of demand (PED) is the responsiveness of the quantity demanded to a change in the price of the good.
The law of demand (topic 4) says that when price goes up, quantity demanded goes down. PED asks the next question: by how much? A small price rise might wipe out half the demand for a luxury item; the same rise might barely dent the demand for an essential medicine. PED puts a single number on that responsiveness.
A definition that just says "how demand changes when price changes" loses the second mark. The keyword examiners look for is responsiveness (or "responsiveness of quantity demanded").