PED & YED.

Question 1

What is PED.

Answer 1

Price Elasticity of Demand measures how responsive demand for a product/service is after a change in price.

Question 2

Elasticity & Inelasticity.

Answer 2

Elastic= demand will change/adapt as price changes.
Inelastic= demand for product will not respond to changes in price for product.

Question 3

Calculating PED.

Answer 3

PED= % change in Quantity Demanded / % change in Price.

% change= new - old / old X100.

Question 4

Factors influencing PED (HABNT)

Answer 4

Habit
Availability of substitute goods
Brand strength
Necessity
Time
These factors will influence how elastic demand will be in response to changes in price.

Question 5

Value of PED.

Answer 5

If:
PED more than 1 = Price Elastics (demand will change/ adapt in response to changes in price).
PED less than 1 = Price Inelastic (no matter change in price, demand will not change).

Question 6

What is YED.

Answer 6

YED - Income Elasticity of Demand measures how responsive quantity demanded for a good is affected by changes in income levels.

Question 7

Calculating YED.

Answer 7

YED = % change in Quantity Demanded / % change in Income .

% change = new - old / old X100=

Question 8

Factors of YED.

Answer 8

Inferior Goods - As income rises, demand for tesco value bread will fall and people will be able to invest in organic bread (higher quality).
Necessity Goods - Consumer will buy necessity no matter change in income.
Goods with Addictive Nature - No matter income, people will buy alcohol.
Luxury/ Normal Goods - As income rises, people will invest in luxuries like branded goos.

Question 9

Value of YED.

Answer 9

Inferior Goods = YED smaller than 1 - demand for inferior goods decrease as income rises.
Necessity Goods = YED smaller than 1.
Goods w Addictive Nature = YED smaller than 1.
Luxury/Normal Goods = YED larger than 1 - demand increase as income increase.