Obj 3.9-3.12 Flashcards
What is elasticity of demand
The measure of the degree of responsiveness of the qty demanded of a g/s due to the changes in determinants of demand
What is price elasticity?
how much the quantity of demand rises or falls when price changes
What are the three main determinants of demand?
Price of the good
Consumer’s income
Price of other goods (substitute and compliment)
What are the three main measures of EOD?
PED- Price elasticity of demand
YED- Income elasticity of demand
XED- Cross elasticity of demand
What is PED?
the measure of degree of responsiveness of the q.d of a product or service to changes in price
Formula for PED
% change in q.d / % change in price
Qd (qty originally demanded) - Qd1-Qd0/Qdo x 100
Pr - p1-p0/pd0 x 100
PED is always a
ngeative figure
Why is PED a ________ figure
an increase in price leads to a fall in q.d and a fall in price leads to a rise in quantity demanded
