PED

• What indicates a price elastic good in terms of PED value?

  PED greater than 1
• What indicates a price inelastic good in terms of PED value?

  PED less than 1
• What does a PED of 1 signify?

  Unit elasticity
• What does a PED of 0 signify?

  Perfectly inelastic
• How does elasticity change along a linear demand curve?

  Elasticity decreases as price falls
• What happens to PED when price is high and demand is low?

  Movement of one unit is a small % change
• What happens to PED when price is low and demand is high?

  Movement of one unit is a low % change
• What is the relationship between price and unit elasticity?

  Medium price leads to medium % change
• What is the relationship between PED and total revenue?

  • Revenue = Quantity Sold x Price
  • Area under demand curve equals revenue
  • Revenue maximized at unit elasticity
  • Elastic demand: lower prices increase revenue
  • Inelastic demand: higher prices increase revenue
• What is the formula for calculating revenue?

  Revenue = Quantity Sold x Price
• What does the area of the demand curve represent?

  It represents total revenue
• What happens to revenue when price is elastic?

  Lower prices increase revenue
• What happens to revenue when price is inelastic?

  Higher prices increase revenue
• What is Price Elasticity of Supply (PES)?

  Responsiveness of supply to price change
• How does consumer behavior relate to PED?

  Changes in price affect consumer purchasing
• What is cross-price elasticity?

  Responsiveness of demand for one good to price change of another
• What occurs when price is medium in terms of % change?

  A movement of one unit is medium % change.
• What is the formula for revenue in economics?

  • Revenue = Quantity Sold x Price
• What does the area made by the demand curve represent?

  It is equal to revenue.
• How is revenue maximized according to the demand curve?

  Revenue is maximized at unit elasticity.
• What occurs when the price is inelastic?

  Firms can increase prices with smaller demand fall.
• What happens to revenue as price moves towards the mid-point of the demand curve?

  Revenue will increase.
• What factors affect price elasticity of supply (PES)?

  • Availability of substitutes
  • Luxury vs. necessity goods
  • Proportion of income spent
  • Time period
• How does the availability of substitutes affect price elasticity?

  More substitutes make demand price elastic.
• What is an example of a good with many substitutes?

  Mars chocolate.
• What is the effect of a low % of income spent on a good?

  The good is price inelastic.
• How does the time period affect price elasticity?

  Short run is price inelastic; long run is elastic.
• What might consumers do in the long run if petrol prices rise?

  They may buy smaller cars or bikes.
• How does brand image affect price elasticity?

  Strong brand image leads to price inelasticity.
• What is price elasticity of demand (PED)?

  It measures responsiveness of quantity demanded to price changes.
• How is price elasticity of demand calculated?

  Percentage change in quantity demanded divided by price change.
• What does it mean if PED is greater than one?

  Demand is considered elastic.
• What does it mean if PED is less than one?

  Demand is considered inelastic.
• What factors affect price elasticity of demand?

  Substitutes, necessity, income proportion, time period.
• Why is price elasticity of demand important for businesses?

  It helps determine optimal pricing for revenue.
• How can governments use price elasticity of demand?

  To make decisions about taxation and regulation.
• What is an example of inelastic demand in the real world?

  Gasoline prices in the short term.
• What is an example of elastic demand in the real world?

  Luxury goods with many substitutes.
• How can knowledge of PED help in A-Level Economics exams?

  Apply concepts to real-world scenarios and calculations.