PED and YED

Question 1

What is PED

Answer 1

Price elasticity is the effect of change in price on quantity demanded

Question 2

What is YED

Answer 2

The effect of change in consumer income on quantity demanded

Question 3

Price and income ELASTIC

Answer 3

When price increased for an elastic product - there is a decrease in demand and revenue falls

When price decreases for an elastic product - there is an increase in demand and revenue rises

Question 4

Price and income INELATSIC

Answer 4

When price increases for an inelatsic product - smaller decrease in demand compared to price - revenue rises

Price decrease for an inelatsic product - smaller increase in demand compared to price - revenue falls

Question 5

PED VALUES and EXAMPLES

Answer 5

If PED is more then 1 = elastic - consumers are very responsive to price changes

If PED is less then 1 = inelatsic - consumers are not bothered about price changes

Elastic products - have lots of substitutes or are not essential - shoes, clothes

Inelatsic products - not a lot of substitutes , addictive or essential - petrol, toilet paper

Question 6

PED and YED formulas

Answer 6

PED = %change in quantity demanded / % change in price

YED = %change in quantity demanded / % change in income

Question 7

Market share formula

Answer 7

Total company sales / market size X 100

Question 8

Market growth formula

Answer 8

(New market size - original market size) / original size X 100

Question 9

What is meant by market share (2 marks)

Answer 9

Percentage of total market sales occupied by a business

Example a restraunt may serve 300 people a week - this is 10% of a local market