3.3 Flashcards
What is PED?
Price Elasticity of Demand, measures the responsiveness of demand to a change in price
What is YED?
Income Elasticity of Demand, measures the responsiveness of demand to a change in income
What is price elastic?
A good where a change in price will cause more than proportional change in the quantity demanded
What is price inelastic?
A good where a change in price will cause a less than proportional change in the quantity demanded
What is elasticity of demand?
The correlation between price and the quantity demanded
What is the calculation for PED?
Percentage change in quality demanded / percentage change in price
What is the PED value for price elastic?
PED value greater than -1
What is the PED value for inelastic?
PED value between 0 and -1
What are factors affecting elasticity?
The number of substitutes,
Whether the food is a necessity or a luxury,
Brand loyalty
What is an example of what happens if a product is price elastic?
If price goes up, demand falls dramatically
What is an example of what happens if a product is price inelastic?
If price goes up, demand falls just a little
What are the market research types?
Qualitative, quantitative, primary, secondary
What is primary research?
Research conducted firsthand for a specific purpose
What is secondary research?
Research using existing resources like government sources, trade publications and market reports
What are the methods of sampling?
Stratification, quota, random
What is market mapping?
A method to identify gaps in the market
What is the formula for percentage change?
Difference (new-old) / original * 100
What are addictive goods?
Goods that may have inelastic demand, for example cigarettes
What are necessity goods?
Goods that typically have inelastic demand, example milk
What is brand loyalty?
High brand loyalty can lead to inelastic demand
What is elastic demand?
Demand changes significantly with price changes
What is inelastic demand?
Demand changes minimally despite price changes
What does it mean when a product is relatively elastic?
Demand is somewhat responsive to price changes
What does it mean when a product is relatively inelastic?
Demand is generally unresponsive to price changes
What does equilibrium price mean?
Price where supply equals demand
What are normal goods?
Demand increases as income rises
What are luxury goods?
Demand and increases significantly with income increases
What are inferior goods?
Demand decreases as income rises
What is positive YED?
Demand rises with increasing income
What is negative YED?
Demand falls with increasing income
What is inelastic YED?
Demand changes less than income changes
What is elastic YED?
Demand changes more than income changes
What is sales forecasting?
Analysing trends to predict future sales
What is financial planning?
Planning based on future income and sales
What are substitutes?
Alternative products affecting demand elasticity
What are cost cutting measures?
Strategies to reduce expenses during declining sales
What is a price increase strategy?
Used when demand is price inelastic
What is the market clearing price?
Price at which all goods are sold
What is consumer income change?
Impact on quantity demanded for various goods
What is loyalty impact?
Brand loyalty affects demand elasticity
