1.2 Business key terms (part 2)

Question 1

elasticity

Answer 1

a measure of how much buyers and sellers respond to changes in market conditions

Question 2

price elasticity of demand (PED)

Answer 2

the responsiveness of demand to a change in price
calculated by:
(% change in quantity demand / % change in price) x 100

Question 3

price inelastic demand

Answer 3

% change in price is greater than % change in demand

PED= < 1

Question 4

price elastic demand

Answer 4

% change is in demand is greater than % change in price

PED= >1

Question 5

discretionary expenditure

Answer 5

non-essential spending or spending that is not automatic

basically a business can get by without it

Question 6

income elasticity of demand (YED)

Answer 6

the responsiveness of demand to a change in income
calculated by:
(% change in demand / % change in income) x 100

Question 7

income inelastic demand

Answer 7

% change in demand is less than % change in income

YED= >0 (positive)

Question 8

income elastic demand

Answer 8

% change in demand is greater than % change in income

YED= <0 (negative)