topic 3 marketing continued Flashcards
price elastic- value of PED
more than 1
price elastic- what does it mean
-change in demand is more than the change in price
price inelastic- value of PED
less than one
price inelastic- what does it mean
-change in demand is less than the change in price
PED formula
% change in quantity demand
_______________________
% change in price
YED formula (income elasticity of demand)
% change in quantity demanded
_________________________
%change in income
what do luxuries have an income elasticity of
income elasticity of more than 1
what do necessities have an income elasticity of
less than 1, but more than 0
what do inferior goods have an income elasticity of
less than 1
what are the three factors that determine the elasticity of a product
- the degree of product differentiation
- the availability of substitutes
- branding and brand loyalty
factors that determine the elasticity of a product
-the degree of product differentiation
the higher the product differentiation…
the lower the price elasticity
factors that determine the elasticity of a product
-the availability of substitutes
when a product has many close substitutes …
the price elasticity tends to e high (price elastic-more than 1)
factors that determine the elasticity of a product
-the availability of substitutes
when a product does not have many close substitutes …
the price elasticity tends to be low (price inelastic)
factors that determine the elasticity of a product
-branding and brand loyalty
the stronger the brand …
the lower the price elasticity (inelastic)
what can data on PED be used for (2)
- sales forecasting
- pricing strategy
