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Business - Theme 1 > elasticity of demand > Flashcards

elasticity of demand Flashcards

1
Q

What is P.E.D?

A

Price elasticity of demand

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2
Q

What does price elasticity of demand measure?

A

how responsive demand is to changes in price

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3
Q

What is a elastic product?

A

larger changes and demand is responsive

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4
Q

What is a inelastic product?

A

smaller change and demand isn’t responsive

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5
Q

What is a elastic demand curve?

A

a demand curve is elastic when a percentage change in price results in a proportionally larger percentage change in quantity demand

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6
Q

What does a inelastic graph look like?

A

straight-ish line

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7
Q

What does a elastic graph look like?

A

flatter line

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8
Q

What are examples of elastic products?

A

tickets, vehicles, TV, airplanes flights, luxury

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9
Q

What are examples on inelastic products?

A

petrol, basic items, essentials, tobacco, habitual substances

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10
Q

What is the formula for P.E.D?

A

percentage change in demand / percentage change in price

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11
Q

What happen when PED = 0

A

Perfectly inelastic

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12
Q

What happens when PED > 1

A

Elastic

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13
Q

What happens when PED < 1

A

Inelastic

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14
Q

What happens when PED = infinity

A

Perfectly elastic

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15
Q

What happens when PED = 1

A

unitary (no change in demand when price changes)

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16
Q

What affects elasticity?

A 
brand loyalty -> level and willingness
substitutes/competition -> similarity
trends
technology
price of complements
nature of product -> necessity/luxury
local monopolies -> substitute
how differentiated a product is
incomes of customers
addictive products
17
Q

How do you work out PED?

A

%change in quantity/% change in price

18
Q

What affects elasticity?

A 
Brand loyalty
substitutes and competition
Trends
technology
price of components
nature of products
local monopolies
differentiation
incomes fluctuations
addictions

Business - Theme 1 (21 decks)

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