PED and Total Revenue
Calculate and interpret how price elasticity of demand links price changes, quantity demanded, total revenue and financial performance in business decisions.
- Syllabus
- First assessment 2019
- Course
- Business XBS11/YBS11
- Level
- AS
Exam points
- Use PED magnitude to predict whether a price rise increases or reduces total revenue.
- Interpret elasticity data in financial contexts such as smartphone sales and income statements.
1.3.2.4e - PED and total revenue question 1
Extract A China's smartphone market In 2021, the sale of smartphones in China decreased by 9\% due to component shortages and lower consumer spending. Smartphone users in China are now keeping their devices longer before upgrading to new models. However, sales of Apple smartphones increased due to its new camera and 5G features giving it a competitive advantage.
Extract B Market share of smartphone sales in China 2021
Extract C The folding smartphone is likely to remain a niche product In 2021, 1.3 billion smartphones were sold globally. Seven million of these were folding models. This represents 0.5\% of the smartphone market. It is predicted that by 2025, this share could rise to 1.8\%. One of the most popular folding phones is the Samsung Galaxy Z Flip3, priced at over $1 000.
Extract D Realme aims to compete with Apple and Samsung Realme is a Chinese business that started in 2018. It manufactures and sells smartphones. Realme has been successful in markets where consumers are seeking high specification phones and fashionable designs at a low price. It is now the second-largest smartphone provider in India. In 2021, Realme launched its smartphones in Europe and other regions outside of China in an attempt to increase its 6\% global market share. It sold 20 million smartphones in 2021, an increase of 48\% from the previous year. In comparison, Apple sold 80 million smartphones in the period of October to December 2021. Realme aims to sell 85 million smartphones in 2022.
A retailer increased the price of the Apple smartphone by 8%. It has a price elasticity
of demand (PED) of -0.5.
Explain how the data above is likely to affect the revenue of the retailer.
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