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business aqa > 1.2.4 price elasticity of demand > Flashcards

1.2.4 price elasticity of demand Flashcards

1
Q

what is elasticity

A

elasticity measures the responsiveness of demand to a change in a relevant variable -such as price or income

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2
Q

what is price elasticity of demand

A

the responsiveness of quantity demanded for a product to a change in its price

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3
Q

what is the calculation for percentage change

A

new price - old price
—————————– x100
old price

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4
Q

what is the calculation for PED

A

%change in quantity demanded / %change in price

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5
Q

what is the value of PED if the price is elastic

A

more than 1

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6
Q

what is the value of PED if the price is elastic

A

less than 1

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7
Q

what is the value of PED if the price is unitary price elastic

A

exactly=1

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8
Q

what does it mean if the value of PED is less than 1

A

changes in demand is less than the change in price

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9
Q

what does it mean if the value of PED is more than 1

A

changes in demand is more than the change in price

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10
Q

what does it mean if the value of PED is exactly 1

A

changes in demand is = to the change in price

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11
Q

how do you calculate percentage change in demand using ped

A

multiply precentage change in price and PED

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12
Q

how does brand strength effect PED

A

products with strong brand loyalty and reputation tends to be price inelastic

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13
Q

how does necessity effect PED

A

the more necessary a product,the more demand tends to be inelastic

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14
Q

how does habit effect PED

A

products that are demanded and consumed as a matter of habit tends to be price inelastic

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15
Q

how does the availability of substitutes effect PED

A

demand for products that have lots of alternatives (substitutes) tends to be price elastic

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16
Q

how does time effect PED

A

price changes tend to have less impact on demand over time

17
Q

why does price elasticity of demand matter

A

business people want to know how a change in price will impact revenue

18
Q

what would happen to the price elasticity of demand if you raise selling price

A

sales revenue will decrease

19
Q

what would happen to the price elasticity of demand if you lower selling price

A

sales revenue will increase

20
Q

what would happen to the price inelasticity of demand if you raise the selling price

A

sales revenue will increase

21
Q

what would happen to the price inelasticity of demand if you lower the selling price

A

sales revenue will decrease

business aqa (22 decks)

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