price elasticity of demand

Question 1

what is ped

Answer 1

measures responsiveness of demand to changes in price

Question 2

ped formula

Answer 2

• percentage change in quantity demanded divided by percentage change in price

Question 3

what is elastic

Answer 3

• when change in qd is bigger than change in price e.g

more than 1

sensitive customers , if price goes up , they stop buying

Question 4

what is inelastic

Answer 4

• change in qd is smaller than change in price

less than 1

not sensitive , will still buy if price goes up

Question 5

what is unitary price elasticity

Answer 5

• exactly = 1
• change in demand = change in price

Question 6

what influences ped

Answer 6

• necessity
• brand strength

Question 7

income elasticity of demand

Answer 7

• measures how much quanitity demanded changes when consumer income changes

Question 8

income elasticity of demand formula

Answer 8

perc change in qd
div
old qd x100

thats formula for quantity demanded

yed formula =
%. change in demand / % change in income

Question 9

interpreting income elasticity of demand

Answer 9

positive yed= normal good , as income goes up , more pppl buy

negative yed = inferior good
as price goes up , less people buy

Question 10

limitation of calculating and using elasticities

Answer 10

• other factors effect demand
  -competitors will react
• hard to get reliable data

Question 11

evaluation points ped

Answer 11

• useful insight for management/ decision making
• ## firms = like products that re inelastic

Question 12

income elasticity , elastic or inelastic

Answer 12

more than 1= income elastic
income increases= demand increases
luxury

less than 1 , but still positive e.g 0.5 =
inelastic
income goes up , demand only increases by little bit
- necessities

less than 1 but negative = inferior good
income rises = people by less of it