Price and Income Elasticity of Demand Data (AQA A-Level Business): Flashcards
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Elasticity definition
Elasticity definition
Measures how sensitive demand is to price/income changes
PED definition
PED definition
How much quantity demanded responds to price change
Elastic demand PED value
Elastic demand PED value
PED > 1 (demand very responsive to price changes)
Inelastic demand PED value
Inelastic demand PED value
PED < 1 (demand not very responsive to price changes)
Examples of inelastic products
Examples of inelastic products
Bread, fuel, salt (necessities)
YED definition
YED definition
How quantity demanded responds to income changes
Price rise + elastic demand effect on revenue
Price rise + elastic demand effect on revenue
Revenue falls (customers buy much less)
Price rise + inelastic demand effect on revenue
Price rise + inelastic demand effect on revenue
Revenue rises (customers still buy almost as much)
Why necessities are inelastic
Why necessities are inelastic
People need them regardless of price; few substitutes
Income elastic products
Income elastic products
Luxury goods (demand rises significantly with income)