1.2.4

Question 1

what is the definition of price elasticity of demand?

Answer 1

A measure of how responsive demand is to a change in price which will determine whether a change in price will lead to an increase or decrease in revenue.

Question 2

what is the equation for PED?

Answer 2

percentage change in quantity demanded/percentage change in price

Question 3

what does a negative PED mean?

Answer 3

Price and demand have an inverse relationship

Question 4

when will a product be price elastic?

Answer 4

When the PED is less than -1 e.g -1.5

Question 5

when will a product be price inelastic?

Answer 5

when the PED is greater than -1

Question 6

Name 3 factors that influence the PED

Answer 6

availability of substitutes, the price of competitors, nature of the product

Question 7

name 4 more factors that influence PED

Answer 7

branding, time, consumer incomes, the definition of the market

Question 8

definition of price elastic demand

Answer 8

a change in price will lead to a more than proportional change in demand

Question 9

definition of price inelastic demand

Answer 9

a change in price will lead to a less than proportional change in demand