1.2.4

Question 1

What is PED?

Answer 1

The responsiveness of demand following a change in price.

Question 2

What is something you must remember with PED calculations?

Answer 2

Always negative.

Question 3

Formula of PED?

Answer 3

% change in Q demanded / % change in price

Question 4

Why will PED always be negative?

Answer 4

Increase relationship between price and quantity.

Question 5

What does it mean if PED is bigger than 1?

Answer 5

Elastic

Experiences a greater change in demand than a change in price.

Question 6

What does it mean when PED between 0-1?

Answer 6

Inelastic

Experiences a lower change in demand than percentage change in price.

Question 7

What type of goods are inelastic products?

Answer 7

Necessities

Question 8

What type of goods are elastic products?

Answer 8

Luxary

Question 9

What acronym would you use to remember factor affecting PED?

Answer 9

SPLAT

Question 10

What does splat stand for?

Answer 10

Substitutes
Percentage of income
Luxury or necessity
Addictive
Time

Question 11

Why will increasing price boost revenue with inelastic product?

Answer 11

Price increases by 5% while Demand went -2%

Although you loose some customers the percentage gain price is bigger.