Price Elasticity

Question 1

Price elasticity of demand

Answer 1

How responsive the change in quantity demanded will be to a change in price

Question 2

Calculation of PED

Answer 2

% change in quantity demanded / % change in price

Question 3

Calculate percentage change

Answer 3

(New value -old value / old value ) x 100

Question 4

Interpretation of PED values

Answer 4

• > 1: elastic
• <1: inelastic
• =1: unit elastic

Question 5

Factors that affect price elasticity

Answer 5

• brand loyalty: makes demand more inelastic
• availability of substitutes: makes demand more elastic
• proportion of income: more price elastic
• luxury: more price elastic
• necessities: more price inelastic

Question 6

Price elasticity full calculation

Answer 6

Change in QD. X 100
Original QD
——————————————-
Change in price. X100
Original price

Question 7

Relation ship

Answer 7

For every 1% that price changes quantity demanded changes ….