Price elasticity of demand Flashcards
1
Q
What is price elasticity of demand?
A
It measures how much demand changes when price changes, always a minus
2
Q
What is ped formula?
A
% change in quantity demanded / % change in price
3
Q
If a product has elastic demand what should the business do?
A
Decrease their prices
4
Q
What affects ped?
A
1) necessity
2) luxary
3) brand loyalty
5
Q
What does it mean if a product has elastic demand?
A
Change in demand was greater than change in price
6
Q
Explain 2 factors which influence PED
A
1) competition- in competitive market it’s more elastic demand
2) proportion of consumers income spend on product- when proportion of income spent is small, demand is likely to be inelastic
