PED

    Cards (48)

    • What does the basic law of demand state will happen when price increases?
      Quantity demanded will decrease
    • According to the basic law of demand, what happens to quantity demanded when the price decreases?
      Quantity demanded will increase
    • What information does price elasticity of demand (PED) provide beyond the basic law of demand?
      How much quantity demanded changes
    • What does price elasticity of demand (PED) measure?
      Responsiveness of quantity demanded to price
    • What is the formula for price elasticity of demand (PED)?
      Percentage change in quantity demanded/percentage change in price
    • In the PED equation, which variable goes on the top?
      Quantity demanded
    • How do you calculate percentage change?
      Difference/original number times 100
    • Why is the PED value almost always negative?
      Inverse relationship between price/quantity demanded
    • When interpreting the PED number, what should you do with the negative sign?
      Ignore it, focus on the number
    • What does it mean if the absolute value of PED is greater than 1?
      Demand is price elastic
    • If demand is price elastic, how does the percentage change in quantity demanded compare to the percentage change in price?
      Greater proportionate change
    • What does it mean if the absolute value of PED is less than 1?
      Demand is price inelastic
    • When demand is price inelastic, how does quantity demanded change relative to the price change?
      Proportionately less change
    • What does it mean if PED is zero?
      Perfectly price inelastic
    • If demand is perfectly price inelastic, how does quantity demanded respond to a price change?
      Quantity demanded doesn't change
    • What does infinite PED signify?
      Perfectly price elastic
    • What term is used when PED equals one?
      Unit price elastic
    • If quantity demanded decreases from 150 to 135, what is the percentage change in quantity demanded?
      10%
    • If the price of a product increases from £4 to £5, what is the percentage change in price?
      25%
    • If the percentage change in quantity demanded is -10% and the percentage change in price is 25%, what is PED?
      -0.4
    • What does it mean if the demand for cigarettes is price inelastic?
      Quantity demanded changes proportionately less
    • If PED for a product is -0.4, is demand price elastic or inelastic?
      Price inelastic
    • If the price of a sofa decreases from £1000 to £800, what is the percentage change in price?
      -20%
    • If quantity demanded increases from 2000 to 3800, what is the percentage change in quantity demanded?
      90%
    • If the percentage change in quantity demanded is 90% and the percentage change in price is -20%, what is the PED?
      -4.5
    • If the PED for sofas is -4.5, what does this indicate about the demand?
      Demand is price elastic
    • How does quantity demanded change relative to the price decrease when demand is price elastic?
      Increases proportionally more
    • What does a steep demand curve indicate?
      Price inelastic demand
    • What happens to quantity demanded with a steep demand curve when price changes?
      Changes proportionately less
    • What does a shallow demand curve represent?
      Price elastic demand
    • How does quantity demanded respond to price changes with a shallow demand curve?
      Changes proportionately more
    • What type of demand does a vertical demand line represent?
      Perfectly price inelastic
    • What does a horizontal demand line indicate?
      Perfectly price elastic
    • What is the mnemonic to remember the factors affecting PED?
      SPLAT
    • According to SPLAT, what does the 'S' stand for?
      Substitutes
    • How does the number of available substitutes affect price elasticity of demand?
      More substitutes, more elastic
    • Why is the demand for commodities like coffee often price inelastic?
      Few available substitutes
    • According to SPLAT, what does the 'P' stand for?
      Percentage of income
    • How does the percentage of income a price change represents affect PED?
      Greater percentage, more elastic
    • Why is the demand for cars more price elastic than the demand for apples?
      Larger income percentage
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