1.1 PED & YED Flashcards
What does PED stand for?
Price elasticity of demand
What does YED stand for?
Price elasticity of income
How do you calculate PED?
D% Demand
D% Price X PED
How do you calculate YED?
D% Demand
D% Income X YED
What does an elastic PED mean?
An increase/decrease in price causes a more than proportional increase/decrease in demand
What does an inelastic PED mean?
An increase/decrease in price causes a less than proportional increase/decrease in demand
Is PED > -1 elastic or inelastic?
Elastic
In terms of PED is -1 greater than -0.5
Yes
Is PED > -1 elastic or inelastic?
Inelastic
Factors that effect PED
Competitions
Luxury vs necessity
Time period
Addictiveness
What the two types of normal goods?
Luxury and necessities
What are normal goods?
Good whose demand rises with income
What happens to the demand of a luxury good as income rises
Demand increases
What happens to the demand of a necessity good as income rises
Demand increases
What happens to the demand of a inferior good as income rises
Demand decreases as income rises
What’s an example of an inferior good?
Second hand items
What’s an example of an luxury good?
Designer clothes
What’s an example of a necessity?
Water
Impacts on business for knowing their YED
Help predict inflows based on economic situation
Factors effecting YED
Type of good
Cultural factors and preferences
