2.5 Price Elasticity of Demand Flashcards
1
Q
What does PED stand for?
A
Price elasticity of demand.
2
Q
What does PED measure?
A
How responsive demand is to a change in price.
3
Q
How do you measure PED?
A
Percentage change in quantity demanded/percentage change in price.
4
Q
What is elastic demand?
A
The quantity demanded changes at a greater rate than the price.
5
Q
What is inelastic demand?
A
The quantity demanded changes at a leaser rate than price.
6
Q
Why is PED important to a firm?
A
It helps them decide what to do with the price if they want to increase total revenue/
7
Q
What is total revenue?
A
The amount of money a firm receives when selling their product not considering total costs.
8
Q
How do you work out total revenue?
A
Total Revenue = Price x Quantity Sold
