Component 1-10. price and income elasticity of demand

what is price elasticity of demand?(PED)

measures the responsiveness of demand to change in price, goods can either be price elastic or price inelastic

what is price elastic

a good where a change in price will cause a more than proportional change in quantity demanded.

If price goes up, demand falls by a larger amount

If price goes down, demand rises by a larger amount

what factors may make a product price elastic

non essential goods

unbranded

can buy at different places

what is price inelastic

a good where a change in price will cause a less than proportional change in the quantity demanded 

If price goes up, demand falls by less than the change in price 

If price does down, demand rises by less than the change in price 

what factors may make a product inelastic

stronger branding- brand loyalty

sell nessecities

have a strong usp

habit

what is income elasticity of demand?(YED)

measures the responsiveness of demand to changes in income- disposable income

what is positive income elasticity 

when income rises, so too much does demand for the product- normal or luxury goods 

what is negative income of elasticity

for some products a rise in income leads to a fall in their demand- inferior goods