Price Elasticity Flashcards
1
Q
Price elasticity of demand
A
How responsive the change in quantity demanded will be to a change in price
2
Q
Calculation of PED
A
% change in quantity demanded / % change in price
3
Q
Calculate percentage change
A
(New value -old value / old value ) x 100
4
Q
Interpretation of PED values
A
- > 1: elastic
- <1: inelastic
- =1: unit elastic
5
Q
Factors that affect price elasticity
A
- brand loyalty: makes demand more inelastic
- availability of substitutes: makes demand more elastic
- proportion of income: more price elastic
- luxury: more price elastic
- necessities: more price inelastic
6
Q
Price elasticity full calculation
A
Change in QD. X 100
Original QD
——————————————-
Change in price. X100
Original price
7
Q
Relation ship
A
For every 1% that price changes quantity demanded changes ….
