Price Elasticity of Demand (PED) (10) Flashcards
1
Q
Define PED
A
PED measures the responsiveness of quantity demanded given a change in price
2
Q
Inelastic and Elastic PED’s
A
> 1 Demand is Price Elastic
< 1 Demand is Price Inelastic
0 Demand is perfectly price Inelastic
∞ Demand is Perfectly Price Elastic
1 Demand is unit Price Elastic
3
Q
PED Formula
A
%△ QD/ %△ P
4
Q
SPLAT
A
- Substitute (No.)
- Percentage of Income
- Luxury/ Necessity
- Addictive/ Habit forming
- Time period
5
Q
Elasticity of Demand
A
Large change in quantity with price changes
6
Q
Inelasticity of Demand
A
Small change in quantity with price changes
7
Q
If Demand is Price Elastic ….
A
1) Price increases and Total revenue decreases
2) Price decreases and Total Revenue increases
8
Q
If Demand is Price Inelastic ….
A
1) Price increases and Total revenue increases
2) Price decreases and Total revenue decreases
9
Q
EOILS
A
ELASTIC OPPOSITE INELASTIC SAME
