Unit 2- Market Analysis

Question 1

Quantitative data

Answer 1

Based on numerical information that can be statistically analysed

Question 2

Qualilitative data

Answer 2

This is based on information based on emotions, feelings, opinions and motivations

Question 3

Elasticity of Demand

Answer 3

Businesses would need to know what would happen if they were to raise ot lower the price of their goods or if consumer income increases or decreases as it can affect demand

Question 4

Price Elasticity of Demand

PED

Answer 4

The measures the responsivness of demand to a change in price. This is a unit free measure
* Price elastic- If PED is more than 1- Demand is sensitive to change in price ( Luxury Proudcts)
* Price inelastic- If PED is less than 1- Demand is not sensitive to change in price ( Necessity products)
* Unitary elastic- If PED 1- Create a equal change in price and cause proportional change in quantity demanded

Question 5

Income Elasticity of Demand

YED

Answer 5

This measures the responsivness of demand to a change in income. It is also a unit free measure but if it is a minus it would be considered
* Income elastic- More than 1- This means that change in income causes a more than proportional change in the quantity demanded ( Luxury)
* Income Inelastic- Between 0 and 1- This means that a change in income causes a less than proportional change in the quantity demanded ( Normal goods)
* Negative income elasticity- Less than 1 and negative numbers- This means that if income rises then demand falls ( Inferior)

Question 6

How does price Elasticity demand affect revenue
( Price Elastic/Inelastic and Unitary elastic)

Answer 6

1. If demand is price elastic and prices are lowered the revenue from each item sold falls but the quantity sold increases more than proportionatley which means that total revenue increases
2. If demand is price inelastic a rise in price will lead to a rise in sales revenue, a fall in price will lead to a fall in sales revenue. This would mean that although sales have increased the fall in revenue from each item sold results in total revenue falling
3. If demand is unitary elastic any change in price will lead to proportional change in demand meaning revenue will demand the same