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2.2 - Coggle Diagram
2.2
Why is Price Elasticity of Demand important?
What is elasticity of demand?
A measure of the responsiveness of quantity demanded to a change in the price of the product.
What does inelastic demand mean?
The price change will lead to a smaller change in demand.
The PED value will be between 0 and -1.
What does elastic demand mean?
The price change will lead to a larger change in demand.
The PED value will be between -1 and infinity.
How does PED affect consumers?
Governments could impose taxes on goods with inelastic demand.
Some customers have forced inelastic demand have to pay higher prices.
How does PED affect
producers?
Knowledge of PED can be used to impact revenue by changing pricing strategies.
What do the PED curves look like?
What do the PED values mean?
What does unitary
demand mean?
The price change will lead to the exact change in demand.
The PED value is 1.
What do economists mean by demand?
What is Demand?
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
What is Derived Demand?
Demand that comes about because of the demand for another product.
What is the law of demand?
For most goods and services the quantity demanded varies inversely with price.
What is the relationship between price and demand?
As prices increase, demand falls. As prices fall, demand increases.
What is individual demand?
The demand for goods and services by an individual consumer. This shows they amount they would be prepared to buy at difference prices. It does not tell us how many she will buy.
How do you draw demand?
The demand curve is plotted sloping downwards between Price on the vertical axis and Quantity Demanded on the horizontal axis.
What is the difference between a movement along and a shift in Demand?
What causes a movement along the curve/How do you draw a movement?
A change in price is the only thing that will cause a movement along the curve.
What are the consequences of movements along the curve?
A movement along the demand curve will lead to price and quantity moving in the opposite direction.
What is the difference between a movement and a shift in Demand?
What causes a shift in demand /How do you draw a shift?
This is when the whole demand curve moves to the right or left. This occurs when the quantity of a good demanded changes even when price stays the same.
Factors affecting demand:
Income
Population
Marketing
Tastes/Fashion
Substitutes/Compliments
Government policies
Price expectations for future
What are the consequences of shifts in demand?
In nearly all cases a shift of the demand curve will lead to price and quantity moving in the same direction.
