1.2.4 Price Elasticity Of Demand 🤑

Question 1

What does PED show ?

Answer 1

The impact that price will have on demand for a product

Question 2

What are the 4 types of price elasticity products and their score ?

Answer 2

Elastic- see a significant change in demand when price has changed (more than one)

Inelastic - change in demand will be less than the change in price 0-1

Perfectly inelastic- no change in demand if there is a change in price 0

Unit elasticity - change in demand is directly proportional to the change in price 1

DOSENT MATTER IF POSITIVE OR NEGATIVE

Question 3

What are the factors influencing price elasticity and demand? 4)

Answer 3

Time- PED Tends to fall longer the timeBecause businesses are more likely to turn substitutes into long-term products

Competition for the alternative product- Some businesses face highly elastic demand for products due to competitive markets

Branding -the stronger the branding the less substitutes are acceptable to customers

The proportion of income spent on products - for inexpensive and expensive products proportion of customers income spent on the transaction is very small demand is likely to be inelastic 

If it’s a Inferior or luxury

Question 4

What happens if prices fall to the revenue?

Answer 4

Decrease

Question 5

What happens if the price Elasticity is less than one?

Answer 5

Its price inelastic meaning that the change in price will not affect the demand of the product

Question 6

What happens if the price elasticity is more than one?

Answer 6

Then it is price elastic meaning that the change in price will change the amount of demand