PED Calculations

Sources for use with Extract E Niche brands are increasing their mass market appeal In the last 10 years there has been an increase in the number of health and well-being brands moving from a niche to a mass market. Many health products are benefitting from increased revenue, due to growing consumer desires to live healthier lives. These brands are no longer viewed as exclusive products and are now purchased by more customers each year. One of these brands is Pukka, which sells premium priced speciality tea. The global speciality tea market is predicted to grow by $50bn between 2021 and 2026. Extract F About Pukka Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.

A retailer selling Pukka tea decreased the price of a packet of tea from $10 to $8. Sales increased from 2,500 packets to 3,500 packets per week.

Calculate the price elasticity of demand (PED) for the packets of tea. You are advised to show your working.