Market analysis

Question 1

What is market analysis ?

Answer 1

Process of collecting info about the market the business is operating in to create effective objectives to ensure success

Question 2

What is price elasticity of demand and equation ?

Answer 2

Measures responsiveness of demand after a change in price. = % change in quantity demanded / % change in price

Question 3

What does it mean if PED is 0 or less ?

Answer 3

Demand is inelastic, doesn’t change when price changes so demand curve = vertical

Question 4

What does it mean if PED is 0-1 ?

Answer 4

Demand is inelastic, % change in demand is lower than price

Question 5

What does it mean if PED is 1 ?

Answer 5

Demand is unit elastic, % change in demand is equal to price

Question 6

What does it mean if PED is 1 or more ?

Answer 6

Demand is elastic, % rise in price means higher fall in demand

Question 7

What are 3 impacts of PED on revenue ?

Answer 7

1. Closer substitutes = more elastic demand
2. If costs involved in switching to another product = demand inelastic
3. Whether the product is luxury or essential

Question 8

What is income elasticity of demand and equation ?

Answer 8

Measures responsiveness of demand after change in consumer income. = % change in quantity demanded / % change in income

Question 9

What YED do normal goods have ?

Answer 9

Between 0 and +1

Question 10

What YED do inferior goods have ?

Answer 10

Lower than 0

Question 11

What YED do luxury goods have ?

Answer 11

Higher than 1

Question 12

What are 2 impacts of YED on revenue ?

Answer 12

1. Whether we are in a boom or recession
2. Whether tax is high or low

Question 13

What 3 things can a business do if a product is sensitive to price ?

Answer 13

1. Focus product on higher income customers
2. Cut costs
3. Attempt to make product more income inelastic