A2.02.03: Determinants of PED

Question 1

General determinants of PED? [SPLAT]

Answer 1

S - substitutes (closeness and number)
P - proportion of income spent
L - luxury or necessity
A - addictive nature
T - time period consumed

B - Brand Loyalty

Question 2

Explain substitutes being a determinant of PED

Answer 2

The more substitutes and the closer they are - the more elastic the demand

Question 3

Explain proportion of income spent being a determinant of PED

Answer 3

If a product’s low price, it’s inelastic and v.v

Question 4

Explain luxury or necessity being a determinant of PED

Answer 4

Food’s a necessity and should be inelastic however if products are defined more narrowly (types of a product) then it becomes more elastic

Evaluation: Necessity is different for different individuals

Question 5

Explain addictive nature being a determinant of PED

Answer 5

The more addictive the product, the more inelastic it is

Question 6

Explain time period consumed being a determinant of PED

Answer 6

PED inelastic short term, PED elastic long term as it takes time to change buying habits