price elasticity

Percentage change =

• original / difference

• original / difference x 100

• difference / original

• difference / original x 100

sales increase from 300 to 345

• increase = 45 %

• increase = 4.5 %

• increase = 1.5 %

• increase = 15 %

Formula for PED =

• % change in quantity demanded / % change in price

• % change in quantity demanded / % change in price x 100

• % change in price / % change in price

• % change in price / % change in quantity demanded

A strong brand (a)   the price elasticity of demand

a 20% price cut causes a 15% increase in quantity demanded (sales)

• PED = -1.33

• PED = -0.75

• PED = -7.5

• PED = -1.75

If more similar products are available (from competitors) then :

• demand is likely to be price inelastic

• demand is likely to be price elastic

• demand is likely to be unaffected

• demand is likely to increase

A price cut will increase revenue if demand is price (a)  

If PED = -1.4

• demand is price inelastic

• demand is not price sensitive

• demand is price elastic

• demand is unaffected by price change

If demand is price inelastic, a price cut will cause revenue to (a)  

Price is reduced from £14 to £11.50 and sales rise by 20%, therefore

• demand is price inelastic

• demand is price elastic

• demand is income inelastic

• demand is income elastic