Session 12 - PED

Question 1

What does PED stand for

Answer 1

Price elasticity of demand

Question 2

How is PED defined

Answer 2

The measure of responsiveness of demand to a change price

Question 3

What is a product if its PED is a whole number e.g -1 or -1.5

Answer 3

Elastic

Question 4

What is a product if its PED is a decimal number e.g -0.1

Answer 4

Inelastic

Question 5

What does it mean if a product is elastic

Answer 5

Change in price of product leads to significant changes in demand for it

Question 6

What does it mean if a product is inelastic

Answer 6

A change in price causes a smaller % change in demand

Question 7

What is an example of an elastic product

Answer 7

Tesco bread - many substitutes

Question 8

What is an example of an inelastic product

Answer 8

Petrol - few substitutes

Question 9

What is the formula for calculating PED

Answer 9

% change in quantity demanded / % change in price

Question 10

What is the formula for calculating % change

Answer 10

(New - old) / old x 100

Question 11

What happens if PED is inelastic and a firm raises its prices

Answer 11

Revenue increases

Question 12

What happens if PED is -1.5 and the firm raises its price by 4%

Answer 12

Revenue decreases