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Can you explain the concept of the Price Elasticity of Demand?

The price elasticity of demand, also known as PED for short, is a measure of how responsive consumers of a product are to a change in price. In a competitive business market, its important for producer to be aware of the PED of their product, so that they can make decisions that will maximise their profits/success and reach their goals.
The price elasticity of demand can be calculating by taking the percentage change in the demand for a product, divided by the percentage change in the price of a product.
A PED that is greater than 1 is known as elastic. An elastic PED implies that consumers are very responsive to a change in price (meaning price has a larger influence on their decision of whether to buy the product). An example of an elastic good is a non-necessity such as a chocolate bar. Meanwhile a PED that is less than one is known as inelastic, meaning that consumers are less responsive to a change in price. An example of a product with an inelastic PED is cigarettes, as the addictive nature of the product means that most consumers will continue to purchase the good regardless of price increases.

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