When the percentage change in price leads to a smaller percentage change in quantity demanded, what is the PED value?

When the percentage change in price leads to a smaller percentage change in quantity demanded, the price elasticity of demand (PED) value will indeed be less than 1. This situation indicates that demand is inelastic; consumers are not significantly responsive to price changes.

Inelastic demand means that even if prices increase, the quantity demanded will not decrease by a proportionately larger amount. This characteristic is typical for essential goods or those with few substitutes, where consumers continue to purchase relatively stable amounts despite price fluctuations.

Understanding this concept is crucial for predicting how changes in pricing can affect total revenue; if demand is inelastic, an increase in price can lead to an increase in total revenue, as the loss in quantity sold does not compensate for the higher price.