PED and Total Revenue
Elasticities of Demand
AO2·AO4·Diagram required
Syllabus requirement
How elasticity affects changes in total revenue when prices change.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Required diagram: Diagram showing relationship between PED and total revenue. Include elastic region (TR falls as price rises), inelastic region (TR rises as price rises), and unitary point.
Summary
This topic explains how price elasticity of demand (PED) affects a firm's total revenue when price changes. It shows the relationship between elastic, inelastic and unitary demand and why raising or lowering price can increase or decrease total revenue depending on where demand lies on the demand curve. The material also covers the main determinants of PED and how PED varies along a linear demand curve.
