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GCSE Economics > Lesson 8- Price elasticity of demand > Flashcards

Lesson 8- Price elasticity of demand Flashcards

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1
Q

Define Price Elasticity of demand

A

Refers to the responsiveness of demand to a change in the price of the good

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2
Q

What is the formula for PED?

A

Percentage change in quantity demanded/ percentage change in price

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3
Q

What is price inelastic demand?

A

Refers to a situations when percentage change in quantity demanded is less than the percentage change in price.

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4
Q

What is the value for price inelastic?

A

less than 1

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5
Q

What is price elastic demand?

A

Refers to a situation when percentage change in quantity demand is greater than the percentage change in price.

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6
Q

What is the value for price elastic demand?

A

greater than 1

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7
Q

Define perfectly inelastic demand

A

Refers to a situation when the quantity demanded does not change as a result of a change in price.

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8
Q

What is the value for perfectly inelastic demand?

A

0

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9
Q

Define perfectly elastic demand

A

Refers to a situation when consumers continue to purchase an unlimited quantity of goods at a particular price.

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10
Q

What is the value for perfectly elastic demand?

A

infinity

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11
Q

Define unitary elastic demand

A

Refers to a situation where percentage change in quantity demanded equals to the percentage change in price. Therefore when the price changes the quantity demanded changes by the same amount.

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12
Q

What is the value for unitary elastic demand?

A

1

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13
Q

What are the factors affecting the elasticity of demand? (4)

A
  1. The demand for a product will be inelastic, if there are no close substitutes. If there are many substitutes the demand will be elastic.
  2. If a large proportion of income is spent on a good, the demand will be elastic. If a small proportion of income is spent on a good, then the demand for the product will be inelastic.
  3. The more important a good the more inelastic it will be. If the good is not that important then the demand for that good will be elastic.
  4. In the short run the demand for a good can be said to be more inelastic
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14
Q

What should the producer of a good do if the demand is inelastic?

A

Increase the price

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15
Q

What should the producer of a good do if the demand is elastic?

A

Reduce the price

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GCSE Economics (42 decks)

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