PED

Question 1

what does PED mean

Answer 1

PED measures the responsiveness of quantity demanded given a change in price

Question 2

PED =

Answer 2

percentage change in quantity demanded over the percentage change in price

Question 3

when is demand price elastic

Answer 3

when PED is greater than 1

Question 4

when is demand price inelastic

Answer 4

when PED is smaller than 1

Question 5

when is demand perfectly inelastic

Answer 5

when PED = 0

Question 6

when is demand perfectly elastic

Answer 6

when PED = infinite

Question 7

when is demand unit price elastic

Answer 7

when PED = 1

Question 8

what is SPLAT

Answer 8

Substitute (number of substitutes, the more substitutes, the more price elastic demand is going to be, vice versa.)

Percentage of income (the greater the percentage of income that a price change takes, the more price elastic the demand is going to be)

Luxury/necessity (luxury has more price elastic demand whilst necessity has more price inelastic demand)

Addictive/ habit forming (if it is addictive, as the price increases, quantity demand will fall but not much, therefore is inelastic)

Time period (short run the demand is inelastic vice versa for long run.)

Question 9

how to calculate PED

Answer 9

Question 10

what is the definition of elasticity

Answer 10

refers to a measure of sensitivity of a variable in accordance with another variables change. change in aggregate demand in response to change in price