Price Elasticity of Demand (PED)

Question 1

Price elasticity of demand

Answer 1

the responsiveness of demand to changes in price - measures the extent to which they will change in response

Question 2

The concept of elasticity

Answer 2

the responsiveness of one variable to changes in another

Question 3

If demand rises by more than 10%…

Answer 3

…..then demand is very responsive to changes in price (elastic)

Question 4

If demand falls by less than 10%…

Answer 4

…then demand is not very responsive to changes in price (inelastic)

Question 5

Elastic demand curve

Answer 5

relatively flat/small decline line

Question 6

Inelastic demand curve

Answer 6

steep decline line

Question 7

If a product is ESSENTIAL…

Answer 7

…demand will not be very responsive to changes in price (inelastic)

Question 8

If a product is ADDICTIVE…

Answer 8

…demand will not be very responsive to changes in price (inelastic)

Question 9

If a product forms a big part of your income (aka if it’s cheap)…

Answer 9

…demand will be more responsive to changes in price (elastic)

Question 10

If a product has any/many substitutes….

Answer 10

….demand will be very responsive to changes in price (elastic)

Question 11

The word equation for PED

Answer 11

Percentage change in quality demand/percentage change in price

Question 12

How to work out the percentage change

Answer 12

change/original x 100

Question 13

What does the figure mean?

Answer 13

the answer will always be negative - the size of the figure shows the elasticity

Question 14

If demand is elastic, the figure will be…

Answer 14

…greater than 1 (e.g., 45 would be very elastic) - this is more proportional

Question 15

If demand is inelastic, the figure will be…

Answer 15

…less than 1 - this is less than proportional