topic 3 marketing continued Flashcards
price elastic- value of PED
more than 1
price elastic- what does it mean
-change in demand is more than the change in price
price inelastic- value of PED
less than one
price inelastic- what does it mean
-change in demand is less than the change in price
PED formula
% change in quantity demand
_______________________
% change in price
YED formula (income elasticity of demand)
% change in quantity demanded
_________________________
%change in income
what do luxuries have an income elasticity of
income elasticity of more than 1
what do necessities have an income elasticity of
less than 1, but more than 0
what do inferior goods have an income elasticity of
less than 1
what are the three factors that determine the elasticity of a product
- the degree of product differentiation
- the availability of substitutes
- branding and brand loyalty
factors that determine the elasticity of a product
-the degree of product differentiation
the higher the product differentiation…
the lower the price elasticity
factors that determine the elasticity of a product
-the availability of substitutes
when a product has many close substitutes …
the price elasticity tends to e high (price elastic-more than 1)
factors that determine the elasticity of a product
-the availability of substitutes
when a product does not have many close substitutes …
the price elasticity tends to be low (price inelastic)
factors that determine the elasticity of a product
-branding and brand loyalty
the stronger the brand …
the lower the price elasticity (inelastic)
what can data on PED be used for (2)
- sales forecasting
- pricing strategy
income elastic= what type of good?
normal good
if income goes up and demand falls, is the number positive or negative?
the number is negative
if income goes up and demand increases, the number is …
positive
income inelastic is what type of good?
an inferior good (as income goes up,demand falls)
what does a normal good have a YED between
a normal good has a POSITIVE YED between 0.1 and 1.5
what does a luxury good have a YED between
it has a VERY positive YED greater than 1.5
what YED does an inferior good have
a negative YED
