Price elasticity of demand

Question 1

PED

Answer 1

measures the responsiveness of quantity demanded for a product to a change in price.

Question 2

PED calculation

Answer 2

%change in quantity demand/% change in price

Question 3

Interpretation of PED

Answer 3

Always negative due to inverse relationship between price and quantity
Elastic=>-1
Inelastic=0-1

Question 4

Where do goods go in PED

Answer 4

Elastic=Luxury goods-cars
-As demand is more responsive to a change in price

Inelastic=Necesscities or addictive goods
-Demand is less responsive to a change in price

Question 5

Factors affecting PED

Answer 5

-Less substitutes=more price inelastic
-Higher brand loyalty=More price inelastic
-The Smaller proportion of income we spend on a product=More price inelastic
-Necesscities=More price inelastic
-Luxury=More price elastic