elasticities
- Created by: vicky
- Created on: 22-12-12 12:30
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- Elastisities
- YED
- What does 2 mean? NORMAL GOODS
- What does the relationship show? the responses of demand depend on the change of income
- What does -2 mean? INFERIOR GOODS
- EQUATION: % change in demand DIVIDED BY % change in real income
- EXAMPLE: Different businesses talor towards different incomes. For example, Asda taylor twards lower income, making their products inferior and therefore have a NEGATIVE elasticity. Whereas somehwere like Waitrose would cater for higher incomes threfore maiing their goods normal and therefore have a POSITIVE elastisity
- GOVERNMENT: they would distinguish policies and look at income affects for example VAT
- PED
- -2 means? INELASTIC
- 1 means? PERECT
- 2 means? PRICE ELASTIC
- The price change can have a large affect on the demand
- EXAMPLE: If holdsay prces decrease by 10% the demand for them would rise by 20%
- The price change can have a large affect on the demand
- Always stays the same
- EXAMPLE: Medicine
- 2 means? PRICE ELASTIC
- A change in price has little change on demand because these are nessesaties
- EXAMPLE: cars and petrol or bread and butter
- 1 means? PERECT
- OVERAL EAMPLE : If businesses want more consumers then they will lower the prices. If they want higher income they will increasse the price but not so much that they willl lose customers
- If the GOV. want more money they will increase taes
- EQUATION: % change in quantity demanded for good A DIVIVED BY % change in price of good A
- What doies the relationship show?If you increase the price of a product it will decreasein demand
- -2 means? INELASTIC
- XED
- what does 2 mean? SUBSITUTE!
- What does -2 mean? COMPLEMENTS
- What does the relationship show? Between the price of one good cmapred to the demand of another.
- Equation: % change on demand for good B DIVIDED BY %change in price for good A
- EXAMPLE: if the price of the playstation went up the demand for a nentendo would increase
- what does 2 mean? SUBSITUTE!
- YED
- What doies the relationship show?If you increase the price of a product it will decreasein demand
- GOVERNMENT: they would distinguish policies and look at income affects for example VAT
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