Price Elasticity Of Demand Flashcards Preview

A Level Economics > Price Elasticity Of Demand > Flashcards

Flashcards in Price Elasticity Of Demand Deck (15)
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1
Q

What is the equation of price elasticity of demand?

A

% change in quantity demanded divided by % change in price

2
Q

What is the definition of price elasticity of demand?

A

The responsiveness of quantity demanded to a change in price of a good or service

3
Q

PED = 0

A

Perfectly inelastic

4
Q

What should a business do if the good is perfectly inelastic?

A

Charge as high a price as they wish

5
Q

PED is between 1 and -1

A

Inelastic

6
Q

What should firms do if the good is inelastic?

A

Raise prices to increase total revenue

7
Q

When is YED inelastic?

A

Between 1 and -1

8
Q

PED=1

A

Unitary elastic

9
Q

What does unitary elastic mean?

A

Increasing or decreasing prices will lead to no change in revenue

10
Q

When is PED unitary elastic?

A

PED=1

11
Q

PED is less than -1 and greater than 1

A

Elastic

12
Q

What should firms do if the good is elastic?

A

Lower prices to increase risk revenue

13
Q

What PED is a good elastic?

A

Less than -1 and greater than 1

14
Q

PED=〰

A

Perfectly elastic

15
Q

What happens if a firm increases the price of a perfectly elastic good?

A

Demand would disappear