GCSE Economics Revision: Price elasticity of demand (PED) (With Mock Questions!)
Hey there, future economists! 🎉
I hope you're feeling ready and motivated to tackle the topic of Price Elasticity of Demand (PED). We're going to break it down in a simple, fun way and help you nail those key points for your GCSE Economics exam.
What is Price Elasticity of Demand (PED)? 📊
Price Elasticity of Demand (PED) is a measure that tells us how the quantity demanded of a good changes when its price changes. Basically, it shows how sensitive consumers are to price changes! If demand changes a lot with a small price change, we call that elastic demand. If it doesn’t change much, we call it inelastic demand.
Key Learning Items for PED 🧠
To do well on this topic, make sure you understand:
🚀 Elastic vs Inelastic Demand – When is demand elastic (PED > 1) and when is it inelastic (PED < 1)?
💰 Factors affecting PED – What things influence whether a product's demand is elastic or inelastic? Think of availability of substitutes, necessity vs luxury, and time period!
🧮 Formula – The PED formula is crucial:
📉 Interpretation of Values – Understand what it means when PED is greater than, less than, or equal to 1.
What You Need to Demonstrate at This Level 💪
To ace this topic in your GCSE exam, you'll need to:
1️⃣ Show you can calculate PED using the formula accurately.
2️⃣ Be able to explain the difference between elastic and inelastic demand with examples.
3️⃣ Understand and describe the factors affecting PED—why some goods are more elastic than others.
4️⃣ Know how PED helps businesses and governments make decisions (like pricing strategies or tax policies).
Make sure you're able to express this clearly in your answers, whether it’s short questions or longer explanations!
Key Things to Remember Before the Exam ✍️
Before the big day, keep these important reminders in mind:
1️⃣ Practice the formula – You’ll likely need to calculate PED, so get comfortable with the math.
2️⃣ Understand the impact of substitutes – If lots of substitutes are available, demand tends to be more elastic.
3️⃣ Think like a business – How would PED influence pricing decisions? How does it impact revenue?
4️⃣ Inelastic goods are often necessities, while elastic goods are more often luxuries.
5️⃣ Stay calm and don't rush your calculations—accuracy is key!
Let’s Test Your Knowledge! 📚
Here are some mock questions to get you exam-ready:
Q1 - If the price of a product increases by 10% and the demand decreases by 20%, what is the PED?
a) 0.5
b) 2
c) 1.5
d) 0.2
Q2 - Which of the following would likely have inelastic demand?
a) Luxury holidays
b) Bread
c) Brand-new smartphones
d) Designer clothing
Q3 - When PED is exactly 1, demand is said to be:
a) Perfectly elastic
b) Unit elastic
c) Perfectly inelastic
d) Elastic
Q4 - Which of these factors does NOT affect price elasticity of demand?
a) Time period
b) Availability of substitutes
c) The price of complementary goods
d) The good’s necessity or luxury status
Q5 - A business should increase the price of a good if the demand for it is:
a) Elastic
b) Inelastic
c) Unitary
d) Perfectly elastic
To check your answers and see more questions check out our GCSE Economics Multiple-Choice booklet, with 250 sample questions and answers for you to revise
Good luck, and remember: You've got this! Keep practicing and stay focused, and you'll ace your GCSE Economics exam. 🎓✨