Price Elasticity Of Demand Flashcards
What happens when a product is price in-elastic?
Price in-elastic products demand changes only very slightly when price changes
What happens to a product when it is price elastic?
Price elastic products demand changes a lot when price is changed
What makes a product price in-elastic?
- it’s a necessity
- brand loyalty
- very few if any substitutes
- habit forming goods (addiction)
How do you calculate price elasticity of demand (PED)?
% change in P
What is price elasticity?
Price elasticity measures the responsiveness of demand to a change in price
Why would firms want to know their YED figure ?
Because if incomes are rising the firm will prioritise the market of the normal and luxury products and withdraw or have less of focus on the inferior products.
Where as if incomes are falling they will allocate more shelf space to their cheaper own brand products
What does YED stand for ?
Income elasticity of demand
How do you calculate responsiveness of demand to a change in income ?
% change in income (Y)
