Calculating Elasticity Flashcards
1
Q
How do you calculate PED
A
% change in price
1+ elastic
-1 inelastic
=1 unitary elasticity
2
Q
What is PED (price elasticity of demand)
A
The responsiveness of a product or services quantity demanded and supplied to a change in price
3
Q
What are the factors affecting PED?
A
Number of close substitutes
Luxuries vs necessities
Proportion of income spent on a good
Habit forming goods
Time periods
4
Q
What are other ways of calculating and predicting PED
A
Using historical data to predict into the future
Using rival firms data to see impacts when they made price change
Carrying out questionnaires and surveys to see how customers react to proposed price changes
Make the change and see what happens
