A retailer produces two separate forecasts for refillable cleaning sprays. In each scenario, all other demand conditions remain unchanged.
| Separate scenario | Price change | Forecast change in quantity demanded | Alternatives available to buyers |
|---|---|---|---|
| One brand of refillable cleaning spray | The brand raises its price by 8%, while the prices of rival brands remain unchanged | Falls by 16% | Several close alternatives from rival brands |
| Refillable cleaning sprays as a whole | Prices across the whole product category rise by 8% | Falls by 4% | Few close alternatives to the product category |
Calculate the price elasticity of demand for each market.
Compare the price elasticity of demand for the two markets and explain the difference.
Explain the likely effect on the individual brand’s total revenue of its 8% price rise.
236 exam-style questions on AQA GCSE Economics 1.3 How prices are determined, covering 1.3.1a Demand and the factors that influence it, 1.3.1b The demand curve, 1.3.2a Supply and the factors that influence it, 1.3.2b The supply curve, 1.3.3a Determining equilibrium price, 1.3.3b Applying diagrams and showing revenue, 1.3.4a Complements and substitutes, 1.3.4b Effects of changes on related markets, 1.3.5a Price elasticity of demand, 1.3.5b Factors affecting price elasticity of demand, 1.3.5c Measuring PED and its implications, 1.3.6a Price elasticity of supply, 1.3.6b Factors affecting price elasticity of supply, and 1.3.6c Measuring PES and its implications. Each one has a worked solution and a mark scheme showing where the marks go.