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3.3 MARKETING > Elasticity Of Demand > Flashcards

Elasticity Of Demand Flashcards

1
Q

What does price elasticity of demand show?

A

How demand changes with price

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1
Q

Is PED always positive or negative?

A

Negative

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2
Q

What does it mean if the PED is greater than 1?

A

The product is price elastic

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3
Q

What does it mean if the PED is less than 1?

A

The product is price inelastic

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4
Q

How do you calculate PED?

A

% change in quantity demanded divided by % change in price

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5
Q

What does it mean if a product is price elastic?

A

A change in price quickly results in change of demand

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6
Q

What does it mean if a product is price inelastic?

A

There is little change between price and demand

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7
Q

What does price elasticity affect?

A

Revenue and profit

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8
Q

What is an example of a price elastic product and why?

A

Dairy Milk - substitutes available

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9
Q

What is an example of a price inelastic product?

A

Iphone - loyalty

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10
Q

What does income elasticity of demand show?

A

How demand changes with income

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11
Q

How do you calculate YED?

A

% change in quantity demanded divided by % in real income

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12
Q

Do normal goods such as fruit and veg have a negative or positive YED? Why?

A

Negative because as income rises, demand rises

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13
Q

Is normal goods less or more than 1 YED?

A

Less than 1

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14
Q

Do luxury goods such as designer products have a negative or positive YED? Why?

A

Positive because demand grows faster than income does

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15
Q

Is luxury goods less or more than 1 YED?

A

More

16
Q

What are inferior goods?

A

Cheaper ‘value’ products e.g supermarket own brand

17
Q

Do inferior products have a negative or positive YED? Why?

A

Negative because demand falls when income rises and demand rises when income falls

18
Q

What does price elasticity help a manufacture decide?

A

Whether to raise or lower the price of a product

19
Q

What does income elasticity help a manufacture decide?

A

What will happen to sales if economy grows or shrinks

20
Q

Is YED always a negative or positive number?

A

Normal and luxury are positive.
Inferior are negative

3.3 MARKETING (11 decks)

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