Understanding Price Elasticity of Demand

This video tutorial introduces the concept of price elasticity of demand, explaining how demand for products and services is influenced by price changes. It covers the calculation of price elasticity of demand (PED) using percentage changes in quantity demanded and price. The tutorial also discusses how to interpret PED values and their implications for businesses. Factors influencing elasticity, such as brand loyalty and necessity, are explored, along with examples of products with elastic and inelastic demand.

What is the primary focus of the concept of price elasticity of demand?

• The sensitivity of demand to changes in price

• The effect of advertising on consumer behavior

• The impact of marketing strategies on sales

• The relationship between supply and demand

Which of the following is NOT a variable typically considered when measuring elasticity?

• Price

• Income

• Quantity

• Advertising

How is price elasticity of demand (PED) calculated?

• By dividing the percentage change in price by the percentage change in quantity demanded

• By multiplying the percentage change in price by the percentage change in quantity demanded

• By dividing the percentage change in quantity demanded by the percentage change in price

• By subtracting the percentage change in price from the percentage change in quantity demanded

In the given example, what was the percentage change in demand when the price increased from £4 to £5?

• 20%

• 30%

• 15%

• 25%

What does a PED value of 0.8 indicate?

• The product is price inelastic

• The product is perfectly elastic

• The product is price elastic

• The product has unitary elasticity

If PED is greater than one, what does it imply about the product?

• The product is price inelastic

• The product is price elastic

• The product is perfectly inelastic

• The product has unitary elasticity

For a product with a PED less than one, what is the expected effect on revenue if the price is increased?

• Revenue will fluctuate

• Revenue will decrease

• Revenue will remain the same

• Revenue will increase

Which type of product is likely to have a high price elasticity?

• A product with strong brand loyalty

• A habitual product

• A necessity product

• A product with many substitutes

What is a common characteristic of price inelastic products?

• They are luxury items

• They are new to the market

• They have many substitutes

• They are necessities

Which of the following is an example of a price inelastic product?

• A popular brand of chocolate

• A monthly subscription to a sports channel

• A daily newspaper

• A specific brand of bread