9) PED Flashcards
1
Q
What is PED?
A
PED is the responsiveness of the demand for a good to a change in its price
2
Q
What is the formula for PED?
A
Percentage change in quantity demanded/
Percentage change in price
3
Q
What is the formula for percentage change?
A
New value - original value
————————————– x 100%
Original value
4
Q
When is demand elastic?
A
If the PED calculation is greater than (minus) one
5
Q
When is demand inelastic?
A
If the PED calculation is between zero and (minus) one
6
Q
Why is it important for a firm to know its PED?
A
So that the firm can judge what might happen to total revenue and profits if its price changes
7
Q
What is the formula for TR?
A
P x Q sold
8
Q
What is the formula for profit?
A
TR - TC
