chapter 2 market analysis

Question 1

what is market analysis

Answer 1

it is concerned with collecting and interpreting data about customers so they can adopt relevent market strategies

Question 2

what is the formula for PED

Answer 2

=(% change in quanity demanded) / (% change in price)

Question 3

what does PED measure

Answer 3

it measure the change in the demand for a product in relation to a chnage in price

Question 4

how do you determine elasicity for PED

Answer 4

• PED >1 = elastic, a change in price will cause a more than proportional change in the quanity demand
• PED < 1 = inelastic, a change in price will casue a less than proportional change in the quantiy demanded
• PED =1 = unitary elastic, a change in price will cause an equal and proportional change in quantitiy demanded

negatives are ignored

Question 5

formula for YED

Answer 5

(% change in quantitiy demanded) / (% change in income)

Question 6

how do you determine elastitciy for YED

Answer 6

• YED>1 = luxury good
• YED< 1 (but positve) =normal good
• YED< 1 ( negative) = inferior good

Question 7

benefits of knowing PED

Answer 7

knowing how consumers respond to change in prices helps reduce risk of uncertainty
also help forcast the sales at a set price

however this depends on the validity of the data

Question 8

advantages of knowing YED

Answer 8

helps them respond to changing econcomic situations and helpt them plan ahead.

however this depends on the validity of the data

Question 9

when is the demand for normal good likely to rise

Answer 9

in a recession when incomes go down