Price Elasticity of Demand
- Created by: hannahmannion
- Created on: 11-05-16 17:10
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- Elasticity - PED
- % change in QD divided by % change in price
- *Golden Rule*-DOT demand on top
- 0=perfectly inelastic 0--1=inelastic 1=unit elastic %change in price (substitutes available)
- Inelastic - %change in price> %change in QD (necessity, no substitutes)
- Unitary elastic - change in price = directly proportional change in D by same amount
- Perfectly elastic = price change results in an infinite change in D
- Perfectly Inelastic = price changes have no effect on demand
- What determines PED?
- Necessity or luxury
- Substitutes Available
- Peak and off-peak
- Cost and ease of switching between products
- Length of time consumers are given to adjust to price changes
- % of Y spent on good
- Product vs brand / branding
- Habitual consumption
- % change in QD divided by % change in price
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