PED Flashcards
LAW OF DEMAND
increase price QD falls
decrease price QD increasea
what type of correlation is there between price and demand
negatvoe
negatove correlation between price and emadn so PED is alwasy
-ve
define aPED
measures resopnsivesness of QD to changes in price
Calculation
percntage change QD / percentage change in price
elastic PED , DEFINITION AND NUMBE
Change in QD greater than change in price -QD is sensitive to price
greater than 1
INELASTIC PED , DEFINIITON AND NUMERB
Change in QD less than proportionat eto hange in rpice - qd not sentitive to rpice
less than 1
mnemonic for PED
eLASTIC Opposite
Inelastic SAME
WHATS THE USEFULNESS
manageers can predict impact on price changs on QD
state 4 areas managers can use PED
STAFFING
stock control
cash flow/incomes statemnent forecast
internatinoal slaes
pricing methods
explainhow PED can help staffing
help maangers prepare staff needed as if product is elastic and you drop price increases QD so more stsff are needed
may need to employ more or use flexoble contracts such as temp staff , prevent customer disatisfation from long waiting staff or not being able to talk to staff
explain how PED can help stock control
introduce buffer stock or JIT as you know if you drop price and elasti cyou need to make a biger order - prevent you being ssen as unreliable
explain how PED can help cash flow or income statement forecasts
morre precise as you can alter then for icrases and drops in price
ensure youre still remaining liquid and or need to employ a new sofe e.g i
building new scenartios
????
how can PED help pricing methods
if product is inelastic managers can decidde to sue price skimmign instead of price pentration in order to amximise profits
how can PED help with international sales
subh=ject to ER
so SPICEE
can increase price of product
if elasric reduce orice
if inelastic increase price
