Micro 3.3 0.0 / 5 ? EconomicsPrice, Income and Cross Elasticities of DemandA2/A-levelAQA Created by: neve.whinnCreated on: 12-03-20 21:14 What is PED? The responsiveness of the quantity demanded of a good or service to a change in price. 1 of 40 How is PED calculated? Percentage change in quantity demanded / percentage change in price. 2 of 40 Why is the value of PED negative? Because of the assumed inverse relationship between price and quantity demanded. 3 of 40 What is the value of PED with price inelastic demand? Between 0 and 1. 4 of 40 What does price inelastic demand mean? Changes in price lead to smaller percentage changes in the quantity demanded. 5 of 40 What is the value of PED with price elastic demand? Greater than 1. 6 of 40 What does price elastic demand mean? Changes in price lead to larger percentage changes in the quantity demanded. 7 of 40 What is the value of PED with unitary elastic demand? 1. 8 of 40 What does unitary elastic demand mean? Changes in price lead to the same percentage changes in quantity demanded. 9 of 40 What is the value of PED with perfectly elastic demand? 0. 10 of 40 What does perfectly elastic demand mean? Changes in price lead to no changes in quantity demanded. 11 of 40 How does price elastic demand affect total revenue following a price change? Reduction in price = increase in TR, increase in price = decrease in TR. 12 of 40 How does price inelastic demand affect total revenue following a price change? Reduction in price = decrease in TR, increase in price = increase in TR. 13 of 40 What are 5 examples that affect PED? Availability of close substitutes, percentage of income spent on product, nature of product, time period, and broad or specific market definition. 14 of 40 How do substitutes affect PED? Close substitutes = price elastic. 15 of 40 How does percentage of income spent on product affect PED? Large percentage = price elastic. 16 of 40 How does nature of product affect PED? Necessity/addictive = price inelastic. 17 of 40 How does time period affect PED? Short run = price inelastic, long run = price elastic. 18 of 40 How does broad or specific market definition affect PED? Broad category = price inelastic, market segment = price elastic. 19 of 40 What is YED? The responsiveness of demand to a change in real income. 20 of 40 How is YED calculated? Percentage change in quantity demanded / percentage change in price. 21 of 40 What goods have a positive YED? Normal goods. 22 of 40 What's the nature of normal goods? A rise in income will lead to an increase in demand. 23 of 40 What goods have a negative YED? Inferior goods. 24 of 40 What's the nature of inferior goods? A rise in income will lead to a fall in demand. 25 of 40 What's the value of YED with with income elastic demand? Greater than 1. 26 of 40 What does income elastic demand mean? The increase in real income has led to a greater percentage increase in demand. 27 of 40 What are income elastic products often referred to as? Luxury goods. 28 of 40 What's the value of YED with with income inelastic demand? Between 0 and 1. 29 of 40 What does income inelastic demand mean? The increase in real income has lead to a smaller percentage increase in demand. 30 of 40 What are income inelastic products often referred to as? Basic goods or necessities. 31 of 40 What's the value of YED with with negative income elastic demand? Less than 0. 32 of 40 What does negative income elastic demand mean? The increase in real income has led to a fall in demand. 33 of 40 What are negative income elastic products often referred to as? Inferior goods. 34 of 40 What is XED? The responsiveness of the demand for a product following a change in price of another product. 35 of 40 How is XED calculated? Percentage change in quantity demanded of product A / percentage change in price of product B. 36 of 40 What does a positive XED indicate? Products A and B are substitutes. 37 of 40 What does a positive XED mean? A rise in the price of product B leads to an increase in demand for product A. 38 of 40 What does a negative XED indicate? Products A and B are complements. 39 of 40 What does a negative XED mean? A rise in price of product B leads to a fall in demand for product A. 40 of 40
AQA Unit 3 Economics: Business Economics and the Distribution of Income 5.0 / 5 based on 1 rating Teacher recommended
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