Price elasticity of demand

Question 1

Define PED?

Answer 1

This measures the responsiveness of quantity demanded given a change in price.

Question 2

How do you calculate PED? you have to queue before you pee

Answer 2

percentage change in QD/percentage change in p

Question 3

Why will PED always be negative?

Answer 3

Ped will be negative because of the law of demand-inverse relationship

Question 4

When PED is less than 1, what does this mean?

Answer 4

This means is price-inelastic (less proportion change in QD)

Question 5

When PED is greater than 1, what does this mean?

Answer 5

This means it’s price-elastic (greater proportion change in QD)

Question 6

When PED is 0, what does this mean?

Answer 6

Demand is perfectly priced inelastic, qd will remain the same despite price changes,

Question 7

When PED is infinity, what does this mean?

Answer 7

Demand is perfectly price elastic

Question 8

When PED is 1, what does this mean?

Answer 8

Demand is unit price elastic

Question 9

How do substitutes affect PED?

Answer 9

Substitutes- The more subs there are more, the more price-elastic it is.
The fewer subs there are the more price-inelastic it is.

Question 10

How does the percentage of income affect PED?

Answer 10

The greater the percentage of income the more price-inelastic it is.
The smaller the percentage of income the more price-elastic it is.

Question 11

How does luxury/necessity affect PED?

Answer 11

luxury-demand will be price elastic

necessity-demand will be price-inelastic

Question 12

How does time period affect PED?

Answer 12

In the short-run it will be price-inelastic but in the long-term the more price elastic it will be as more subs are available.