Elasticities 0.0 / 5 ? EconomicsCompetitive marketsASOCR Created by: SimoneCreated on: 16-03-14 16:21 Define PED measures the responsiveness of quantity demanded to changes in price 1 of 15 How do you work out a change in percentage? difference / original X100 2 of 15 Formula for PED % change in QD / % change in price 3 of 15 What sign is PED? Negative 4 of 15 When is PED elastic? greater than -1 5 of 15 What good is elastic? Luxury 6 of 15 When is PED inelastic? between 0 and -1 7 of 15 What good is inelastic? necessities 8 of 15 Business relevance of PED? affects pricing decisions? 9 of 15 If a good is inelastic what should a firm do? increase price to increase TR 10 of 15 If a good is elastic what should a firm do? decrease price to increase TR 11 of 15 What are the determinants of PED? 1. availability and closeness of substitutes 2. proportion of consumer's total expenditure 3. time 12 of 15 Explain availability and closeness of substitutes? the more substitutes the more elastic 13 of 15 Explain proportion of expenditure lower proportion, lower elasticity 14 of 15 Explain time short term = inelastic, long term = elastic 15 of 15
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