AS經濟essay必寫題PED

Exam PreparationW14 P21 Q2Discuss whether it is both possible and beneficial for a business to change the price elasticity of demand for its product. [12]

小伙伴看到題目的第一反應一般都是：PED還能改的嗎.......？？

PED不能直接改，畢竟我們不能強迫廣大消費者去買東西，但我們可以改變影響PED的因素啊！所以請大家千萬牢記影響PED的五個因素，忘了的同學記得趕緊去翻一下昨天的推送~答題思路

Part 1 ：先說下Benefial，這個大家比較熟悉了：

● 如果PED是inelastic，那企業提價

● 如果PED是elastic，那企業降價企業嘛，很粗暴的，怎么賺錢怎么來；那如果提價的同時能賺更多的錢，那就美滋滋了。于是企業一般會想方設法讓自己的產品變得PED inelastic.

Part 2：討論怎么改變PED。

兩個方法

方法一：打廣告目的：Habit forming；luxury -> necessity問題：廣告很貴啊，而且不一定有用啊....同時，你真的很難改變一個東西的屬性。

方法二：降價目的：lower proportion of income ；reduce number of substitutes問題：降價受到生產成本的限制，不能降太多的。以及，如果想通過降價來干掉競爭對手，你需要有很大的市場占有率才行。試想一下，現在市面上突然出現一種兩塊錢的手機，你會買么？

Part 3：PED的問題（evaluation）

請小伙伴們記住PED的兩個重要的limitations！

1 PED很難去準確衡量

2 PED是會變的（短期inelastic，長期elastic）

Part 4：結論

As always，不要忘記在最后一段寫上結論，簡單總結一下之前說過的所有東西，有1分的喔！

福利！ Sample Answer！

Part 1:Benefits of changing PED of products? [2]

See notes above (Please draw diagrams)

Part 2: Explain possibilities for business to change PED [6]

Advertising a product can make it more price inelastic, because advertisement make a product more unique, in other words, not easily be displaced by any goods with similar price. Therefore, even if the price of the product is a little higher than its similar substitutes, the demand would not be largely influenced. However, this sort of promotion is really costly; and advertisement may be not effective.Firms may also change the image of products to change PED, for example, firms may emphasize that the products are luxury in advertisement and change the package of the products.

However, it’s quite hard to change the people’s original feeling towards the products once they have accepted what kind of products they were.Firms can also change PED by largely adjusting the price of products, goods on which higher proportion of income should spent is usually more price elastic, while goods on which lower proportion of income should spent is more price inelastic.

However ,restricted by the cost of production, large change in price of a sort of products would be impossible in most of time.Large and powerful firms can change PED by forcing their competitors out of business, by strategies such as predatory pricing. The reduction in the number of competitors contributes less substitutes of the products they produced, the more PED inelastic the product is. However, it may require large power and influence of the industry and it should be oligopoly or monopoly in the industries.

Part 3：Evaluative comments [4]

it’s really difficult (as it’s often costly) and unpredictable (real PED value is difficult to accurately measured) to increase revenue though changing PED. Meanwhile, PED vary over time: it is inelastic in the short term and elastic in the long term. There are more predicable and easy alternative measures to increase revenue by , for example, increase quantity demanded (advertisement, price cut or promotion)or lower cost of production(training , higher expenditure on employment scheme, hire expertise & experienced managers) .

Part 4 : Conclusion