PED measures the responsiveness of demand to a change in price. A steep demand curve implies a good that has price inelastic demand ie demand for it is not responsive to a change in price. A shallow demand curve implies a good that has price elastic demand ie demand is responsive to a change in price. Goods with price inelastic demand tend to have few substitutes eg petrol, alcohol, cigarettes. PED is always a negative number.

• When PED > -1, then demand is price elastic
• When PED < -1, then demand is price inelastic
• When PED = 0, demand is perfectly inelastic
• When PED = infinity, demand is perfectly elastic following a change in P

It can be calculated using the formula:

% change in demand
% change in price