Question

2.If the PED = 100 for a product,

what would the demand curve look like?   (draw it)

How do consumers view this product?

Give an example of a product that might have a large PED like 100

Answer 1

a)

Price elasticity of demand = % change in Q.D. / % change in Price

When PED >1 Elastic demand occurs when % change in quantity is greater than % change in price

then demand responds more than proportionately to a change in price

b)

Consumers are highly responsve to price change .Quantity demanded changes a lot when prices change a little.

c)

a particular brand of cold drink (Pepsi or Coke)

even if there is small increases of prices people will shift to other brand (High Substitution ).