1.2.4 price elasticity of demand Flashcards
1.2.4
what is PED
price elasticity of demand
PED is how sensitive demand for a product or service is to a change in price
1.2.4
what type of relationship is there between price and demand?
there is an inverse relationship between price and demand
1.2.4
as price does up demand goes ______?
as price goes up demand goes DOWN
1.2.4
as price goes down demand goes ______?
as price goes down and demand goes UP
1.2.4
what does price elastic demand mean?
that a change in price will lead to a more than proportional change in demand.
.i.e.
demand is sensitive to price changes
1.2.4
what does price inelastic demand mean?
that a change in price will lead to a less than proportional change in demand
i.e.
demand is not so sensitive to change in price
1.2.4
what is the formula for PED
% change in quantity demanded
__________________________
% change in price
1.2.4
in businesses it is assumes that the PED will always be _______?
negative
i.e.
price and demand will always move in the opposite direction
1.2.4
if PED is between 0 and -1 then?
demand is price inelastic
1.2.4
is PED is less than -1 then?
demand is price elastic
1.2.4
what are the factors that influence PED?
- income of consumers
- nature of the good ( luxury or necessity)
- substitutes
- branding
- time
1.2.4
if PED is ELASTIC and you RAISE the selling price, sales revenue will ______?
sales revenue will DECREASE
1.2.4
is PED is ELASTIC and you LOWER the selling price, sales revenue will _______?
sales revenue will INCREASE
1.2.4
if PED is INELASTIC and you RAISE the selling price, sales revenue _______?
sales revenue will INCREASE
1.2.4
if PED is INELASTIC and you LOWER the selling price, sales revenue will ______?
sales revenue will DECREASE
