CROSS ELASTICITY OF DEMAND (XED) ADVERTISING ELASTICITY OF DEMAND (AED)

Slides:



Advertisements
Similar presentations
Elasticity! Boingy, boingy, boingy!
Advertisements

AS Economics and Business PED unit 2b By Mrs Hilton for revisionstation.
Chapter 4 Section 3 Elasticity of Demand
1.2 Elasticities Price Elasticity of Demand (PED)
HL MARKETING THEORY ELASTICITY
Demand Review Economics Mr. Bordelon.
Introduced to the world on 27 January 2010 On 3 April 2010 it arrived in US ’ s apple stores People are able to obtain the revolutionary item by just.
HL MARKETING THEORY ELASTICITY IB BUSINESS & MANAGEMENT – A COURSE COMPANION: p
+ Product Life Cycle Stage 6 Business Studies Marketing Ms Giveen 2010.
HL2 ECONOMICS REVIEW OF ELASTICITY An Introduction to Elasticity.
Cross Price Elasticity of Demand IB Economics. Cross Price Elasticity of Demand (PED x,y ) Cross price elasticity (PED x,y ) measures the responsiveness.
The Allocation Of Resources In Competitive Markets
Demand and Supply: an Introduction
MICROECONOMICS TOPIC 2 Economics DEMAND.
1 Price Elasticity of Demand  In order to predict what will happen to total expenditures,  We must know how much quantity will change when the price.
Presentation Pro © 2001 by Prentice Hall, Inc. Economics: Principles in Action C H A P T E R 4 Demand.
Economics Chapter 4 - Demand. What Is the Law of Demand? The law of demand states that consumers buy more of a good when its price decreases and less.
Chapter 4 Understanding Demand Yoliann Pons Period.5
IB Business and Management
Chapter 4: Demand Opener
Understanding Demand What is the law of demand?
1 Managerial Economics & Business Strategy Chapter 3 goes with unit 2 Elasticities.
Elasticity of Demand. What goods would you always find money to buy even if the price were to raise drastically? What goods would you cut back on, or.
What Is the Law of Demand?
Demand.   Objectives:  Explain the law of demand.  Describe how the substitution effect and the income effect influence decisions.  Create a demand.
Chapter 4: Demand Section 3: Elasticity of Demand
%change in X -Inflation -Elasticity. GDP/Inflation Inflation rate is measured by using a price index for two years. The consumer price index may give.
Demand Chapter 4 Section 3. Key Terms elasticity of demand: a measure of how consumers respond to price changes inelastic: describes demand that is not.
ELASTICITY.
Chapter 4 DEMAND.
Economics Unit Three Part I: Demand. Demand Essentially, demand is the willingness (or desire) to buy a good or service and the ability to pay for it.
Income Elasticity of Demand
Price Supply and Demand. 4 P’s…Prices in a Free Market Some companies have no control over the prices they can sell their good for if one product is the.
Chapter 4: Demand Section 1
Cross Elasticity of Demand. Definition Measures how much the demand for the product changes when there is a change in the P of another product. % change.
Chapter 4.3: Elasticity of Demand
Elasticity. Price elasticity of demand Measures the responsiveness to a change in price; that is, will the quantity demanded change if the price of the.
Elasticity of demand is a measure of how consumers react to a change in price.  Demand for a good that consumers will continue to buy despite a price.
TOPIC:Topic 4: Marketing LESSON TITLE:Price Elasticity LEARNING INTENTION: To understand the how demand and supply affect pricing strategies. COMPETENCY.
Elasticity of Demand. Objectives To understand and be able to calculate income and cross price elasticity of demand Be able to evaluate the business relevance.
4.3 The Elasticity of Demand Elasticity of demand describes how people react to changes in prices.
Chapter 4: Demand Section 3. Copyright © Pearson Education, Inc.Slide 2 Chapter 4, Section 3 Objectives 1.Explain how to calculate elasticity of demand.
Economics Chapter 4 - Demand What Is the Law of Demand? The law of demand states that consumers buy more of a good when its price decreases and less.
3-1 Quantitative Demand Analysis. Overview I. The Elasticity Concept n Own Price Elasticity n Elasticity and Total Revenue n Cross-Price Elasticity n.
CHAPTERS 4-6 SUPPLY & DEMAND Unit III Review. 4.1 Understanding Demand Demand: the desire to own something and the ability to pay for it. The law of demand:
Cross Elasticity of Demand The extent to which demand for one product changes in response to the price change of another product XED is all about substitutes.
1.2.3 Unit content Students should be able to: Explain price, income and cross elasticities of demand Use formulae to calculate and interpret numerical.
1.2.4 Price elasticity of supply What is the relationship between price and supply? State 2 factors that would shift a supply curve to the left. What is.
PRICE ELASTICITY OF DEMAND Price Elasticity of Demand (PED) Price Elasticity of demand (PED) measures the extent to which the quantity.
Product Life Cycle Introduction GrowthMaturity Decline Product introduced into the market. Product is enjoying success. Much of the target market knows.
Cross-Price Elasticity of Demand (XED)
Chapter 4 Section 3 Elasticity of Demand. Elasticity of demand is a measure of how consumers react to a change in price. What Is Elasticity of Demand?
Cross Price Elasticity of Demand AS Economics. Cross Elasticity of Demand (CPed) Cross price elasticity (CPed) measures the responsiveness of demand for.
Economics Chapter 4 Demand. Section 3 Elasticity of Demand.
What are “demand” and “supply” and how do they work together to determine the prices of goods and services?
Do Now – Write Down Your Answers Are there some products that you would continue to buy, even if the price were to skyrocket? Are there other products.
Interest in virtual education is rising Schools offer individualized learning and a flexible schedule Enrollment continuing to increase.
Chapter 20.2 Factors Affecting Demand. Changes in Demand Market demand can change when more consumers enter the market; when incomes, tastes and expectations.
Prototype 1 Key Terms –income effect –substitution effect –change in demand –substitutes –complements –change in quantity demanded.
Copyright 2004 – Biz/ed The Market Mechanism VCE Business.
AS Business PED Price Elasticity of Demand. Lesson Objectives To be able to describe the terms elastic and inelastic demand To be able to identify a range.
HL1 ECONOMICS MICROECONOMICS
ChapterDemand 8 8 Guiding Questions  Section 1: Understanding Demand  How does the law of demand affect the quantity demanded? The law of demand states.
F1 Micro economic factors. 1. The micro-environment Definition The micro environment refers to the immediate operational environment including suppliers,
Elasticities of demand
21.1 Demand and 21.2 Factors Affecting Demand
21.1 Demand and 21.2 Factors Affecting Demand
Elasticity … allows us to analyze supply and demand with greater precision. … is a measure of how much buyers and sellers respond to changes in market.
Product Life Cycle Business Management.
Presentation transcript:

CROSS ELASTICITY OF DEMAND (XED) ADVERTISING ELASTICITY OF DEMAND (AED)

LEARNING OBJECTIVES To be able to interpret and calculate cross elasticity and advertising elasticity of demand

CROSS ELASTICITY OF DEMAND (XED)  Measures the responsiveness of demand for a product following the change in the price of another product Cross Elasticity = % change in demand for product X % change in demand for product Y

CROSS ELASTICITY OF DEMAND (XED) If 2 goods are close substitutes, such as Xbox and PlayStation, then a fall in the price of Xbox is likely to lead to a reduction in the price of PlayStations. Cross elasticity is positive If 2 goods are often bought together. IPhone and IPhone Apps, then an increase in the price of the phone is likely to lead to a reduction in the demand for applications. Cross elasticity is negative

A 10% price rise for Bounty´s causes a 20% increase in quantity demanded of Mars Bars. FACT XED = +2 A 20% price rise for battered fish causes a 50% decrease in quantity demanded of chips. This is also a FACT XED = -2.5

XED, SUBS AND COMPS XED = +1 or greater  This means that the goods are substitutes (by raising the price of one, people turn to the other). The higher the number, the STRONGER the substitute. XED = -1 or ‘greater’  This means that the goods are complements (by raising the price of one, people also stop buying the other). The ‘higher’ the number, the STRONGER the complement. If XED is less than 1, then there is little or no connection. If it is 0, then the good is totally INDEPENDENT

Can you think of some substitutes or complimentary goods?

ADVERTISING ELASTICITY OF DEMAND (AED) Measures the responsiveness of demand for a product following a change in the advertising spending on it Advertising Elasticity = % change in demand for product % change in advertising spend on product

ADVERTISING ELASTICITY OF DEMAND (AED) Generally, where a company spends on advertising, demand tends to be high This is not always the case, if:  Rival firms spend more on advertising  Campaign is expensive and ineffective  Other elements of the marketing mix are not working well

ELASTICITY & THE PRODUCT LIFE CYCLE

Elasticity & The Product Life Cycle Stage of the product life cycle Application of elasticity Launch / Introduction and growth PED - Price will not affect demand, people are willing to pay high prices, maybe we could even charge higher prices YED – XED – AED – Saturation \ Maturity Decline

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.