Price elasticity of demand (PED) measures how sensitive the quantity demanded of a good or service

is to changes in its price. It quantifies the responsiveness of consumer demand to price fluctuations.

Here are some key examples to illustrate different types of price elasticity:

1. **Elastic Demand (PED > 1)**: In this case, a small change in price results in a proportionally larger
change in quantity demanded. Examples include luxury goods like high-end smartphones, designer
clothing, or expensive vacations. If the price of a luxury car increases by 10%, the quantity demanded
might drop by more than 10% because consumers can easily postpone or forgo purchasing these
items.

2. **Inelastic Demand (PED < 1)**: Here, changes in price have a relatively small impact on the
quantity demanded. Necessities like gasoline, prescription medications, or basic food items typically
have inelastic demand. If the price of prescription medicine rises by 10%, people will still need it and
may only reduce their consumption slightly.

3. **Unitary Elasticity (PED = 1)**: In this scenario, the percentage change in quantity demanded is
exactly equal to the percentage change in price. This is relatively rare in practice, but an example
could be if the price of a certain generic product falls by 10%, and the quantity demanded increases
by 10%.

4. **Perfectly Elastic Demand (PED = ∞)**: In theory, this means that consumers will only buy a
good at a specific price and won't buy any if the price increases even slightly. In practice, this is not
common. An example might be a product with many close substitutes where consumers can switch
easily if the price changes.

5. **Perfectly Inelastic Demand (PED = 0)**: This implies that quantity demanded remains the same
regardless of changes in price. An example could be life-saving medications where consumers have
no choice but to purchase them at any price.

Understanding price elasticity is crucial for businesses and policymakers. It helps firms set
appropriate pricing strategies, estimate revenue changes, and assess the impact of taxes or subsidies
on goods and services.