Question

1. Explain the price elasticity of demand. Use the numbers in your explanation. Give examples that are not in the book.
2. Explain the AIDA process. How does this ad: https://youtu.be/38Bw8MSumh8?list=PL7s4_bl8ueOC_pBY6ztJcZp-jkvJDSuK_ take a viewer through the process? Do you think it works? Be specific in your answer.

Answer 1

Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change.

Basically Price elasticity of demand = % change in quantity / % change in price

If the quantity demanded of a product exhibits a large change in response to changes in its price, it is termed "elastic," that is, quantity stretched far from its prior point. If the quantity purchased has a small change in response to its price, it is termed "inelastic" .

• If price increases by 10% and demand for CDs fell by 20%
• Then PED = -20/10 = -2.0

• If the price of petrol increased from 130p to 140p and demand fell from 10,000 units to 9,900
• % change in Q.D = (-100/10,000) *100 = – 1%
• % change in price 10/130 ) * 100= 7.7%
• Therefore PED = – 1/7.7 =  -0.13