3.2g Price Elasticity of Demand Flashcards Preview

Business Studies AS > 3.2g Price Elasticity of Demand > Flashcards

Flashcards in 3.2g Price Elasticity of Demand Deck (10):
1

What does PED measure?

The responsiveness of demand for a product following a change in price

2

PED formula

PED = % change in quantity demanded ÷ % change in price

3

What is the PED if demand is perfectly inelastic?

0 - demand does not change at all when price changes

4

What is the PED if demand is inelastic?

Between 0 and 1 - percentage change in demand is smaller than percentage change in price

5

What is the PED if demand is unit elastic?

1 - percentage change in demand is exactly the same as percentage change in price

6

What is the PED if demand is elastic?

Above 1 - percentage change in demand is larger than percentage change in price

7

What happens if PED is inelastic and a firm lowers its price?

Total revenue decreases

8

What happens if PED is inelastic and a firm raises its price?

Total revenue increases

9

What happens if PED is elastic and a firm lowers its price?

Total revenue increases

10

What happens if PED is elastic and a firm raises its price?

Total revenue decreases

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