- = inferior good / + = normal good / if less than 1 = inelastic / if more than 1 =elastic
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(YED) calculation
% change in quantity demanded/ % change in incomes
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(YED) Luxuries
As income grows, more luxury goods are bought
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(YED) Necessities
As income grows, less necessity goods are bought
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(YED) Definition
Measures the responsiveness of demand to a change in price.
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(YED) Limitations
can be difficult to get reliable data, other factor affect demand - many markets subject to rapid tech changes – makes previous data less reliable - competitors will react pricing decisions can’t be taken in isolation
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(YED) Limitations continued...
elasticities provide useful insights for management in decision making, firms tend to like having products with inelastic demand, building strong USP is a good strategy for making demand more price inelastic.
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Other cards in this set
Card 2
Front
(YED) calculation
Back
% change in quantity demanded/ % change in incomes
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