Price elasticity of demand ( PED ) Flashcards
1
Q
What is PED ?
A
The responsiveness of demand given a change in the price
2
Q
What is the equation for PED ?
A
% change in Q demanded / % change in price
3
Q
What does > 1 elasticity mean ?
A
It is Price Elastic
4
Q
What does < 1 elasticity mean ?
A
It is Price inelastic
5
Q
What does 0 elasticity mean ?
A
It is Perfectly Inelastic
6
Q
Infinity elasticity means ?
A
It is Perfectly elastic
7
Q
What does 1 elasticity mean ?
A
It is unit elastic
8
Q
When is a substitute elastic or inelastic ?
A
The more substitutes = More elastic it is
9
Q
When is the % of income elastic or inelastic ?
A
Greater % of income when price increases or decreases changes a persons wallet
10
Q
What elasticity is a luxury good ?
A
More elastic
11
Q
What elasticity is a necessity ?
A
More inelastic
12
Q
A
