Price Elasticity Of Demand Flashcards

1
Q

What is the equation of price elasticity of demand?

A

% change in quantity demanded divided by % change in price

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2
Q

What is the definition of price elasticity of demand?

A

The responsiveness of quantity demanded to a change in price of a good or service

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3
Q

PED = 0

A

Perfectly inelastic

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4
Q

What should a business do if the good is perfectly inelastic?

A

Charge as high a price as they wish

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5
Q

PED is between 1 and -1

A

Inelastic

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6
Q

What should firms do if the good is inelastic?

A

Raise prices to increase total revenue

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7
Q

When is YED inelastic?

A

Between 1 and -1

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8
Q

PED=1

A

Unitary elastic

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9
Q

What does unitary elastic mean?

A

Increasing or decreasing prices will lead to no change in revenue

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10
Q

When is PED unitary elastic?

A

PED=1

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11
Q

PED is less than -1 and greater than 1

A

Elastic

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12
Q

What should firms do if the good is elastic?

A

Lower prices to increase risk revenue

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13
Q

What PED is a good elastic?

A

Less than -1 and greater than 1

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14
Q

PED=〰

A

Perfectly elastic

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15
Q

What happens if a firm increases the price of a perfectly elastic good?

A

Demand would disappear

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