PED Flashcards
(5 cards)
1
Q
What would a PED of -2 for green socks tell us?
A
top number in our formula is bigger than our bottom number
ANY PED BIGGER THAN ONE-INIFINITY MEANS THAT DEMAND IS ELASTIC
demand for green socks is very sensitive to a change in price
2
Q
Interpret a ped of 0.5 for eggs
A
top of our formula is smaller than bottom
when ped is between 0 and -1 it is INELASTIC
THEREFORE, EGG SELLERS CAN CHANGE PRICES AS DEMAND WILL CHANGE LITTLE
3
Q
Interpret a ped of 1
A
Unitary elastic
Top of our formula is the same size as bottom
4
Q
Interpret a PES of 2?
A
Over one, so it is ELASTIC
the good is sensitive to a change in price, sellers will be incentivised to supply more where the price increases
5
Q
Interpret a PES of 0.5
A
Inelastic- btween 0-1
The good has a greater Q%CHANGEP than Q%CHANGES
