PED

Question 1

What is PED

Answer 1

the responsiveness of the quantity demanded to a change in price

Question 2

PED Formula

Answer 2

% change in quantity demanded / % change in price

Question 3

What goods have a negative coefficient in PED

Answer 3

Normal goods with downward sloping demand curves

Question 4

Describe Perfectly Inelastic

Answer 4

PED = 0

Vertical Line

Demand does not change at all

Question 5

Describe price inelastic

Answer 5

0 > PED > -1

Question 6

Describe Unit Price Elastic

Answer 6

PED = -1

Question 7

Describe Price Elastic

Answer 7

PED between -1 and -infinity

Question 8

Describe Perfectly Elastic

Answer 8

PED = Infinity

Question 9

Factors influencing PED

Answer 9

Number of substitutes

Cost in switching suppliers

Necessity or Luxury

Habitual Demand

Percentage of income

Question 10

Effect of inelastic PED on total revenue

Answer 10

Rise in total revenue when price rises

Question 11

Effect of elastic PED on total revenue

Answer 11

Rise in total revenue when price falls

Question 12

Effective of perfectly inelastic PED on total revenue

Answer 12

Revenue is the same

Question 13

Effect of unit elastic PED on total revenue

Answer 13

No change in total revenue

Question 14

What happens to PED when you move from left to right along the demand curve

Answer 14

it becomes increasingly price inelastic

Question 15

What can firms predict with PED

Answer 15

Effect of change in price on total revenue

Price volatility

Change in tax incidence