Price Elasticity of Demand Help - AQA GCSE Economics

Seems quite a broad question. Is it multiple choice, essay, or what?

Basically I suppose, for a given supply curve, more price-elastic demand implies higher prices. Not sure how much exposition they're looking for though?

Hi,

Does anyone know the implications of price elasticity of demand for producers and consumers?


If it helps, I'm doing AQA GCSE Economics

I think it might mean knowing that if the price rises for an inelastic product (e.g. due to a tax), the producers can pass on most of the burden onto the consumer, meaning that price rises a lot but quantity demanded decreases by a little. It's the opposite for elastic demand where the burden to the producer is greater than the burden to the consumer.

Think cigarettes and Thorpe Park... cigarettes have an inelastic demand as they are addictive, therefore producers can increase demand without losing customers. On the other hand, if Thorpe Park tickets rise, consumers can switch to other substitutes (Alton Towers etc) or not go (because Thorpe Park is a luxury, and arguably cigarettes are a necessity for some) therefore a small increase in price results in a big decrease in quantity demanded.

Hope this helps

Yes, price elasticity of demand is the change in demand for a 1% change in the price of a product. For producers the implications are the incentive to keep increasing the price of products when the products are inelastic because demand will not change a lot compared to the price increase. The implication on the consumer is the consumption of a product will not decrease by a lot when the price of an inelastic good increases, the consumer will spend a larger proportion of their budget on the product, reducing consumption of other products more than the inelastic product. And the reverse is true for elastic products where consumers buy more when the price falls, and the producers might produce less because the increase in profit from the increase in demand does not cover the fall in profit cause by the fall in price. There is more that could be said to explain the point where producers stop producing, the point where consumers consume, and the changing budget constraints for consumer, however, for GCSE economics I do not think that level of detail will be needed.

I'd suggest not worrying about it. All you need to know are the determinants of elasticities (choice/competition, etc) & how elasticity impacts on the slope of curves.