1.2.4 price elasticity of demand (PED) Flashcards
1
Q
elasticity (def.)
A
measures the responsiveness of demand to a change in price
2
Q
price elasticity (def.)
A
measures how responsive quantity demanded of a product is to a change in price (elastic or inelastic)
3
Q
price elasticity of demand formula
A
PED = % change in QD / % change in P
(always negative)
4
Q
what does a PED > 1 mean?
A
the good is price elastic
change is demand is more than the change in price
5
Q
what does a PED < 1 mean?
A
the good is price inelastic
change in demand is less than the change in price
6
Q
what does a PED = 1 mean?
A
the good is unitary price elastic
change in demand = change in price
7
Q
factors affecting PED
A
brand strength
necessity v luxury
habit/trends
availability of substitutes
time
