Cards (22)

    • Define PED
      the responsiveness of quantity demanded to the change in price
    • What's the formula for PED
      this
    • define total revenue
      the total amount of money earned by all firms by selling the total quantity of a product in a market in a given time period TR= P*Q
    • define total expenditure
      the total amount of money spent by consumers in buying the total quantity of a product in a market in a given time period
    • Why is PED negative
      shows there's an inverse relationship between price and Qd
    • What value indicates something is fairly elastic
      when PED > 1
    • what does it mean if something is price is fairly elastic
      consumers are more sensitive to price change
    • what does it mean if something is price is fairly inelastic
      consumers are less sensitive to the price change
    • what's the value if something is fairly inelastic
      between 0-1
    • what is meant when something is unit elastic
      where the decrease/increase in price is equal to the decrease/increase in demand
    • whats the value if something is unit elastic
      PED =1
    • what's the value if something is perfectly elastic
      PED= infinite
    • How does time period affect PED
      The decision making to purchase goods or service, SR- inelastic and LR-elastic
    • How do substitutes affect PED
      The more substitutes, the more elastic good. Whereas the the less subsitutes, the more inelastic good
    • How does the percentage of income impact PED
      The smaller percentage of income, the more inelastic good as it takes up a smaller amount of income, meaning it isn't worth as much as a more expensive good
    • Why can PED be difficult to implement when making pricing decisons
      Its difficult and expensive method to carry out
    • Price is not the only factor affecting a consumers decision when purchasing a good at a particular time
    • PED for a good can change in time- complements of products (Apple Ecosystem)
    • Why can PED be an ineffective measure to compare people
      PED isn't the same for any two people given in different demographics, locations and degree of necessity
    • How can firms use PED to increase or decrease prices
      It allows them to predict changes in demand
    • How can firms Price discriminate?
      Using PED data from consumers they can change prices
    • How are taxes altered by the government
      Through PED data, they can alter things such as corporation tax