Unit 7 - Price Elasticity Of Demand Flashcards
Def: price elasticity of demand (PED)
The responsiveness of demand to a change in price
Equation of price elasticity
Percentage change in quantity demanded / percentage change in price
Equation of percentage change
New - origin / origin x100
Price elasticity will be
More than one
Price inelastic when
Less than one
Def: price elastic demand
A change in price results in greater change in demand graph is less steap
Def: price inelasticity of demand
A change in price results in a proportionally smaller change in demand more steep
Examples of inelasticity
Price has less impact therefore
Essential goods
Eg electricity
Examples of elasticity of demand
When there are more substitutes
Eg shoes
Factors that influence PED + mini explanation (4)
Brand strength- strong brand loyalty = price inelastic
Necessity- more necessary more ineslastic
Time - price elasticity tends become more inelastic as time passes
Competition for same product - more competition more elastic
Equation of revenue
Total units sold x price per unit
Inelastic: what happens to total revenue if price
decreases increases
Fall
Rise
Elastic: what will happen to total revenue if price
decreases increases
Rise
Fall
