3.2h - Price Elasticity of Demand (2)

Question 1

What are the influences on the PED of a product?

Answer 1

• Percantage of income allocated to spending on it
• Brand loyalty
• Addictiveness
• Degree of necessity
• Time period allowed following a price change (if change price lots PED is more likely to be elastic)
• Substitutes available
  PLANTS

Question 2

Ways for a business to ensure that their products are price inelastic:

Answer 2

• Differentiate the product
• Take over competition (limit choice)
• Tie customers into contracts
• Sell a necessity