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aqa a-level microeconomics year 1 > Demand Elasticities (PED and YED) > Flashcards

Demand Elasticities (PED and YED) Flashcards

1
Q

What does elasticity measure?

A

the responsiveness of the quantity of good/service to a change in another factor

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2
Q

What does law of demand state?

A

when prices increased, the quantity of the good/service demanded fell

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3
Q

What does PED measure?

A

how responsive the quantity demanded of a product is to a change in its price

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4
Q

What does PED stand for?

A

Price Elasticity of Demand

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5
Q

What is the equation used to calculate PED?

A

Percentage Change in Quantity Demanded/ Percentage Change in Price

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6
Q

What does PED of 0 show?

A

Perfect inelasticity

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7
Q

What does perfect inelastic demand show?

A

Demand is completely unresponsive to price changes

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8
Q

What does a PED between 0 and 1 show?

A

Price Inelastic demand

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9
Q

What does price inelastic demand mean?

A

The demand responds less than proportionately to price changes

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10
Q

What does a PED value of 0 show?

A

The good has unitary elastic demand

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11
Q

What does unitary elastic demand show?

A

A change in price causes an exactly proportional change in demand

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12
Q

What does a PED between 1 and infinity show?

A

Price elastic demand

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13
Q

What does price elastic demand show?

A

Demand responds more than proportionately to a change in price

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14
Q

What does a PED of infinity tell us?

A

The good has perfectly elastic demand

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15
Q

Perfect Inelastic Demand
Change in Demand vs Change in Price

A

Demand DOES NOT CHANGE to a change in Price

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16
Q

Price Inelastic Demand
Change in Demand vs Change in Price

A

Change in Demand IS LESS than the change in Price

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17
Q

Unitary Elastic
Change in Demand vs Change in Price

A

Change in Demand IS EQUAL to the change in PRICE

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18
Q

Price Elastic Demand
Change in Demand vs Change in Price

A

Change in Demand IS MORE that the change in Price

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19
Q

Perfectly Elastic Demand
Change in Demand vs Change in Price

A

Demand FALLS TO ZERO if Price rises

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20
Q

Perfect Inelastic Demand
Impact on Firms Revenue when PRICES RISE

A

Firms revenue increases

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21
Q

Price Inelastic Demand
Impact on Firms Revenues when PRICES RISE

A

Firms revenue increases

22
Q

Unitary Elastic
Impact on firms revenue when PRICES RISE

A

Firms revenue DOES NOT CHANGE

23
Q

Price Elastic Demand
Impact on Firms Revenue when PRICES RISE

A

Firms revenue FALLS

24
Q

Perfectly Elastic Demand
Impact on Firms Revenue when PRICES RISE

A

Firms revenue FALLS TO ZERO

25
Q

Perfectly Inelastic Demand
Impact on Firms Revenue when PRICES FALL

A

Firms revenue DECREASES

26
Q

Price Inelastic Demand
Impact on Firms Revenue when PRICES FALL

A

Firms revenue DECREASES

27
Q

Unitary Elastic
Impact on Firms Revenue when PRICES FALL

A

Firms revenue DOES NOT CHANGE

28
Q

Price Elastic Demand
Impact on Firms Revenue when PRICES FALL

A

Firms Revenue INCREASES

29
Q

Perfectly Elastic Demand
Impact on Firms Revenue when PRICES FALL

A

Firms revenue infinitely INCREASES

30
Q

What are four factors which determine elasticity?

A

Availability of substitutes
Size of the market definition
Time
Percentage of income the product costs
Necessities vs Luxuries

31
Q

What does YED stand for?

A

Income elasticity of demand

32
Q

What does YED show?

A

how responsive the quantity demand for a product is to a change in (real) income

33
Q

What is real income?

A

refers to incomes that have been adjusted for changes in prices

34
Q

What is the equation for YED?

A

Percentage change in quantity demanded / percentage change in income

35
Q

What is the income elasticity for normal goods?

A

Positive

36
Q

What is the income elasticity for a luxury good?

A

> +1

37
Q

What is the income elasticity of necessities?

A

> 0 and <+1

38
Q

What is the income elasticity of inferior products?

A

Negative

39
Q

What does a coefficient between 0 and 1 for YED show?

A

Goods are normal goods or the goods are necessities

40
Q

What does a coefficient greater than 1 for YED show?

A

The goods are luxury goods

41
Q

What does a coefficient less than 0 for YED show?

A

Goods are inferior goods

42
Q

What is the effect of a rise in income in normal goods in terms of demand?

A

Demand will increase

43
Q

What is the effect of a rise in income in luxury goods in terms of demand?

A

Demand will increase

44
Q

What is the effect of a rise in income in inferior goods in terms of demand?

A

Demand decreases

45
Q

If following a moderate increase in income more of the good is demanded what type if good is this?

A

A normal good

46
Q

What is the income elasticities of normal necessities?

A

Low but positive income elasticity

47
Q

Give an example of a normal necessity?

A

Milk

48
Q

Are normal necessities income elastic or income inelastic?

A

Income inelastic

49
Q

What is the income elasticity of normal luxuries?

A

High and positive

50
Q

If following an increase in income less of the good is consumed, what kind of good is this?

A

Inferior

aqa a-level microeconomics year 1 (21 decks)

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