theme 1 Flashcards
1
Q
perfectly inelastic
A
PED = 0
2
Q
inelastic
A
PED 0-1
3
Q
unitary elastic
A
PED = 1
4
Q
PED > 1
A
elastic
5
Q
factors determining PED
A
1.) number of close substitutes
2.) price of the product I n relation to income
3.) cost of substituting
4.) brand loyalty
5.) degree of necessity
6
Q
effect of price decrease on TR with elastic demand
A
increased TR
7
Q
effect of price increase on TR when demand is inelastic
A
increased TR
8
Q
evaluation of PED
A
problems with inaccurate or incomplete data collection
price elasticity of demand varies by region / time period
9
Q
functions of price mechanism
A
1.) allocate scarce resources
2.) rationing - when D> S
3.) signalling
4.) incentives - supply
10
Q
A
