Price and Income elasticity of demand 4.5 / 5 based on 2 ratings ? Business StudiesMarketing and competitive environmentsASAQA Created by: konradekeCreated on: 25-03-16 11:04 What is Price elasticity of demand a measure of? How responsive demand is to a change in price 1 of 16 What happens when price goes up? Demand goes down - Price and demand have an inverse relationship 2 of 16 What does price elastic mean? Price elastic means that a change in price will lead to a more than proportional change in demand 3 of 16 What does price inelastic mean? Price inelastic means that a change in price will lead to a less than proportional change in demand 4 of 16 How do you calculate PED? % Change in quantity demanded / % Change in Price = PED 5 of 16 How do you calculate change in demand? Change in demand / original demand X 100 6 of 16 How do you calculate change in price? Change in price / Original Price X 100 7 of 16 What factors influence PED? The availability of substitutes, The price of competitor goods, Time, Branding, Income and the Nature of the good 8 of 16 Is a luxury good price elastic or inelastic? Elastic as demand will be sensitive to changes in price 9 of 16 Will a necessity good be price elastic or inelastic? Price inelastic as demand will be less sensitive to change in price 10 of 16 What is income elasticity of demand (YED)? It is a measure of the responsive of demand to changes in income 11 of 16 What is a normal good? When demand for a product increases when incomes increase 12 of 16 What is an inferior good When demand for a product decreases as income increases 13 of 16 What is the formula for Income elasticity of demand? % Change in quantity demand / % Change in income 14 of 16 What is the YED coefficient for an Income inelastic product? -1 15 of 16 What is the YED coefficient for an Income elastic product/ +1 (Demand changes at a higher proportion than the change in income 16 of 16
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