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Business Studies

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Business Studies

Business is an integral part of our daily lives. The term is used to describe organizations that operate in a market to sell goods and services for a profit. Businesses can take a variety of different forms and operate in a wide range of different industries. Some organizations’ main goals are maximizing profits, while others pursue social and environmental objectives. It is important to keep in mind that business studies go beyond explaining the different types of business and understanding finances – you will cover a wide range of topics such as innovation, leadership, global marketing, and organizational culture. By studying business, you will not only understand how to sell goods and services but gain deeper insight into markets, stakeholders, strategy, and decision-making.

Are you studying for your upcoming business exam or starting to write your business coursework? StudySmarter can help you with business studies revision and preparation. On StudySmarter, we cover all business topics and provide you with detailed revision notes and guides. You also have free access to a business quiz and hundreds of business studies topic flashcards.

Introduction to Business Studies.

How can StudySmarter support me in business studies?

On StudySmarter, you can access all business studies learning material for free. Prepare for your exams with our complete guide of business topics and revision notes. Check your business knowledge with our existing flashcards and quizzes, or create your personalized flashcards with your friends.

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Do you prefer studying with friends? On StudySmarter, you can create and join study groups together with your classmates to revise the most relevant topics for your upcoming business exams or projects. You can share revision notes and flashcards that are specifically designed for your courses.

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Topics and Learning Objectives in Business Studies

Throughout your business course, you will learn about the business’ various elements and functions, including operations, finance, marketing, human resources, management, and strategy. You will familiarize yourself with the key aspects of business decision-making in different contexts and environments. You will also broaden your understanding of how decisions impact different business stakeholders. Finally, you will be able to evaluate managerial and strategic decisions through qualitative and quantitative analysis. On StudySmarter, you will find detailed summaries and revision notes on the following key business topics and subtopics:

  • Nature of Business
  • Managers
  • Marketing
  • Operational Management
  • Financial Performance
  • Human Resources
  • Strategic Analysis
  • Strategic Direction
  • Business Development
  • Change Management

Nature of Business

As a first step, we have to understand what businesses are and why they exist. Businesses exist to make a profit, survive, grow and even reach social aims. One key feature of businesses is that they all have a mission and should have objectives that guide them to attaining their mission.

Another important step is understanding the different forms of business. This is an important concept to consider when making business decisions and evaluating performance.

The external environment also plays an important role in decision-making and includes various factors like competition, demographics, the environment, or interest rates, which can hugely influence operating costs and the demand for a business’s products and services.

To test your knowledge, take a look at our business studies flashcards under the ‘Nature of Business’ subtopic!

Managers

Management is another key component of business studies. Managers play a key role in all forms of business. Their role is about making decisions, analyzing, planning and reviewing, and finding an effective leadership style through which they can motivate and support employees. They also need to understand stakeholder needs and how to manage relationships between various stakeholders. Managers should make decisions based on data and intuition, keeping in mind the mission and objectives of the organization.

To find out more about management and leadership, take a look at our detailed explanations under the ‘managers’ section.

Marketing

Marketing is an integral part of every business. By setting effective marketing objectives, a company can boost its sales, gain market share and increase brand loyalty. To achieve these results, the business needs to understand the market and consumers, which can be done through primary and secondary research. Marketing also involves segmenting consumers, targeting a defined segment, and effectively positioning the product or service through a niche or mass-market strategy. An additional tool for marketing decision-making is the marketing mix, which is made up of the 7Ps:

  • Product
  • Price
  • Promotion
  • Place
  • People
  • Process
  • Physical environment

To learn more about the essentials of marketing and decision-making to improve marketing performance, take a look at the ‘marketing’ business studies revision guide.

Operational Management

Setting operational objectives is another fundamental part of the business. Operational objectives can include:

  • Decreasing costs
  • Increasing quality
  • Adding value
  • Flexibility or dependability
  • Environmental goals

Once operational objectives have been set, the business needs to analyze its operational performance. Operational performance can be measured through operational data – by calculating metrics like labor productivity or unit cost. Through these calculations, we can understand the business’s operational strengths and weaknesses and make further decisions on how to optimize efficiency and productivity. Another core concept in operations management is understanding supply chains and managing inventory. These are essential for maximizing operational efficiency.

Financial Performance

The financial performance of a business is based on a couple of key factors. The business has to plan, analyze and set financial objectives. Financial objectives can include things like:

  • Cash flow objectives
  • Profit objectives
  • Capital expenditure objectives.

These can be measured through performance metrics like return on investment (ROI), profitability ratio analysis, break-even analysis or cash inflows and outflows. The financial performance also includes budgeting, forecasting and sourcing finance. There are many ways businesses can source finance in both the long and the short term. It all comes down to understanding how we can make effective financial decisions that boost the business’s financial performance.

Financial performance in Business Studies

Human Resources

Human resource decisions can also expand the competitiveness of a business. Human resource objectives could include training, diversity, and employee engagement. Both internal and external factors can influence how a business sets human resource objectives.

For a deep dive into human resources-related decision-making, check out our explanations under Human Resources.

Strategic Analysis

To understand the strategic position of a business, we need to analyze its mission, objectives, and strategy. We need to look at a business’s internal position and performance to understand where strengths and weaknesses come from. In order to understand opportunities and threats, the business needs to examine its external environment through a PESTLE analysis and the competitive environment through Porter’s five forces.

To learn more about how the external and internal environment plays a role in business strategy, take a look at our explanations under analyzing the strategic analysis section.

Strategic Direction

Every business needs to have a strategic direction – they need to decide which market to operate in, what products to offer, and how to enter the selected market. Businesses also need to determine their strategic positioning and sustain their competitive advantage.

To find out more about competition and strategy, look at our in-depth explanations under strategic direction.

Business Development

Once a business has established its strategy, it is time to figure out how to pursue the strategy in a profitable way. It is important to evaluate whether the business is growing and find strategies to overcome problems in case the business is stagnant or growing too quickly. Innovation and internationalization can play a huge role in the growth of a business. Recently, digital technology has also become valuable for strategy and almost inevitable for businesses to adopt.

Change Management

Change can often be a daunting process for businesses. The causes for change can be internal or external, but it can be very valuable for strategy either way. The problem is that change often comes with resistance. Managers have to successfully overcome barriers to change by leading organizational culture and implementing strategy effectively.

Take a look at our revision notes on change management for more detail!

Final Business Studies Quiz

Question

What is the definition of a sole trader?

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Answer

A sole trader is a business that is owned and managed by one person. People operating a sole trader business work for themselves and are responsible for all business activities and decisions involved in running the business.

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Question

What is another term for a sole trader? 


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Answer

A sole proprietor. The terms 'sole trader' and 'sole proprietor' are synonymous.

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Question

Define unlimited liability. 


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Answer

Unlimited liability is when an individual is personally responsible for all the actions of their business. For a sole trader there is no distinction between the individual and the business. This means that the individual is personally responsible for their business losses and problems. For instance, if a sole proprietor borrows money from a bank and cannot repay their debt, they may risk losing personal possessions.

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Question

Which one of the following is not a common characteristic of a sole trader?

  1. Confident in making decisions 

  2. Has business and management skills. 

  3. Can manage their time effectively. 

  4. Reports directly to their manager. 

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Answer

D.

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Question

One of the main disadvantages of a sole trader is:

  1. It is very complicated to set up and register. 

  2. It can get quite lonely working on your own. 

  3. You have direct contact with clients, making it hard to keep up with all the communication. 

  4. You rely on your employees for a lot of different business procedures. 

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Answer

B.

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Question

Why would someone choose to operate as a sole trader rather than work for a company?


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Answer

  • Flexible working hours.

  • Ability to make all decisions without having to report to a manager. 

  • Being 'your own boss'. 

  • Direct relation to the market and clients. 

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Question

Does operating as a sole trader mean that a business will always be able to make the right decision?


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Answer

No, this is not true. A sole trader has the freedom to make all decisions on their own without the involvement of a manager or other team members. However, this does not mean that a sole trader will always make the correct decision for their business. It is easy to get demotivated, lack appropriate time management skills and become disorganized when you are working without supervision and the guidance of others.

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Question

Does operating as a sole trader mean that you cannot hire anyone to help you with certain tasks?


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Answer

No, as a sole trader it is possible to hire employees. However, it is the sole trader's responsibility to make the right decisions when hiring help, as they are personally liable for all the operations and actions of their business.

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Question

Does operating as a sole trader mean that you are not allowed to take out a loan from the bank?


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Answer

As a sole trader, it is possible to borrow money from a bank or other financial institutions. However, it could be disadvantageous to do this since they often charge high interest rates. Banks do this because they are worried about the sole trader being able to repay their debts in case of failure.

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Question

Which one of the following is not a benefit of operating as a sole trader?

  1. Easy to set up. 

  2. Quick and efficient decision-making process. 

  3. Unlimited liability. 

  4. Keeping all the profits the business makes. 

Show answer

Answer

B.

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Question

Is it true that there are no downfalls to operating as a sole trader?


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Answer

No, this is not true. The disadvantages of a sole trader include: 

  • The risk of losing customers if you take time off

  • Pressure to deal with everything by yourself 

  • The sole responsibility for all business-related decisions 

  • The loneliness of working alone.

  • Unlimited liability. 

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Question

Is it true that by hiring an employee, they are also responsible for the actions and decisions of the sole trader?


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Answer

No, the sole trader is individually and solely responsible for all the actions and decisions they make.

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Question

Name some of the disadvantages of the freedoms a sole trader experiences.


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Answer

One of the advantages of a sole trader is that they can set their schedule and work flexibly. However, this can result in the sole trader having to work long hours and not being able to take any holidays.

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Question

Name three examples of a sole trader. 


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Answer

Several different types of jobs are suitable for a sole trader:

  • Plumbers 

  • Electricians 

  • Gardeners

  • Copywriters

  • Artists

  • Taxi drivers

  • Nannies

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Question

Name and outline an example of someone who would want to set up a sole trader.


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Answer

An example of someone who would want to set up as a sole trader would be a freelance copywriter. They would enjoy the benefits of managing their own schedule, making their own business decisions and the freedoms that come with being their 'own boss'. Their business can respond directly to the needs of her clients, engage with her clients on a personal level, and make decisions freely on the number of clients they take on.


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Question

What is incorporation?

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Answer

Incorporation is a process through which a business establishes itself as a company. Through incorporation, the business establishes that it is its own legal entity, separate from its owners and shareholders. It allows the company to benefit from limited liability. 


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Question

What is limited liability?

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Answer

Limited liability ensures that the personal assets of the owners and shareholders of a company are safe. If the company were to experience financial troubles, shareholders would only lose up to the amount they originally invested in the company when they bought shares. Limited liability ensures that their personal belongings are kept safe, even if the company is struggling financially.

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Question

What is the difference between limited liability and unlimited liability?


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Answer

In limited liability companies, the company is a separate legal entity to its owners. This means that they are not personally responsible for the debts of the company. In an unlimited liability business, the owner is personally responsible for the debts of the business. This means that if the business were experiencing financial difficulties, the personal assets of the owner are at risk.

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Question

Is it possible to set up a limited liability sole proprietorship?


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Answer

No, it is not possible to set up a limited liability sole proprietorship. The owner of a sole proprietorship has unlimited liability, meaning that their personal belongings and assets are at risk if the business is experiencing financial difficulties. 


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Question

What is a dividend?


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Answer

A dividend is a part of the firm's profits that is paid to its shareholders. The more shares an owner has in the company, the more dividend payments they receive.

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Question

Are dividend payments equal to the original investment shareholders made into the firm?


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Answer

No. Dividends are paid based on the profits the company has made. This does not mean that shareholders receive the value of their original investment each time a dividend is paid to them.

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Question

Why do companies have limited liability?

  1. Because owners do not want to be taxed. 

  2. Because they do not want to pay dividends. 

  3. Because they do not want to be incorporated. 

  4. Because owners do not want to be personally liable for losses. 

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Answer

D.

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Question

A difference between a limited liability company and a sole proprietorship is that: 


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Answer

A limited liability company can own property and a sole proprietorship cannot

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Question

The difference between a private limited company and a public limited company is that:


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Answer

Private limited companies can decide who they sell shares to but public limited companies cannot

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Question

What type of company would be at risk of a takeover?

  1. Private limited company 

  2. Public limited company

  3. Sole proprietorship 

  4. Partnership

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Answer

B.

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Question

Imagine you are running a family business. The business is doing really well, so you decide you are going to incorporate your business. What type of company would you set up if you did not want to risk the family business getting into the hands of non-family owners?


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Answer

You would set up a private limited company. This type of company would ensure that the owner (you) has control over who the company sells its shares to. 


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Question

What are some of the advantages of a limited liability company?


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Answer


  • Owners are not personally responsible for the losses and debts of the company - they have limited liability.

  • The company is a separate legal entity.

  • No restriction on the number of owners.

  • Easier access to capital and resources (compared to a sole proprietorship).

  • The business can raise finances through share capital. 

  • Flexibility when it comes to company management.

  • The potential to benefit from economies of scale. 

Show question

Question

What are some of the disadvantages of a limited liability company?

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Answer

  • It is expensive to set up if the company is just starting up. 

  • You must pay your shareholders dividends. You cannot keep all the profits your company makes.

  • Takeovers are also a possibility for public limited companies, which could lead to a loss of control for the current owners. 

Show question

Question

One of the disadvantages of a limited liability company is that: 

  1. There are restrictions on the number of owners.

  2. There are restrictions on the number of shares you can sell. 

  3. The owners are personally liable for the debts of the company. 

  4. The company is potentially at risk of takeovers.

Show answer

Answer

D.

Show question

Question

Other than limited liability, what are some of the advantages of operating as a limited liability company?


Show answer

Answer

  • Easier access to capital and resources (compared to a sole proprietorship).

  • The business can raise finances through share capital. 

  • Flexibility when it comes to company management.

  • The potential to benefit from economies of scale. 

Show question

Question

What is the definition of a non-profit business?

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Answer

A non-profit organization is a social enterprise that has social aims and operates to benefit a community or society as a whole. The mission of non-profit organizations can range from community service projects, childcare, recycling companies, apprenticeship programs, etc.

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Question

What is one of the key differences between a non-profit and a for-profit organization?


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Answer

A non-profit is an organization that is not set up to make profits. For non-profit organizations, the goal is not to maximize profits. Rather, their objectives are to operate for the benefit of a community or society as a whole.

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Question

What are the three different types of non-profit organizations?

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Answer

  • Philanthropic organizations

  • Advocacy organizations

  • Mutual benefit organizations

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Question

What are the three different types of public sector businesses?


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Answer

  • Public corporations

  • Public services

  • Municipal services 

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Question

What is the general mission and purpose of non-profit organizations?


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Answer

The mission and purpose of non-profit organizations are to create social benefits, also known as social capital. By creating social capital, non-profit organizations aim to solve an existing problem or issue in order to advance humanity in a certain way.

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Question

What is the definition of privatization?


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Answer

A process in which the state transfers their businesses or services from public to private ownership.  


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Question

Give an example of a potential downfall of privatization.

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Answer

A potential problem that could arise as a result of privatization is short-term unemployment.

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Question


Which of the following statements about non-profit organizations is true?

  1. They do not make any profits. 

  2. Stakeholders are not involved in the business. 

  3. They do not distribute profits. 

  4. They can only be established as hobbies. 

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Answer

C.

Show question

Question

Which of the following statements about co-operatives is false?

  1. They are run for the benefit of the government.

  2. Co-operative are a common type of mutual business. 

  3. Co-operatives must represent social responsibility. 

  4. Co-operatives are run by members who each have a say in the management of the business.

Show answer

Answer

A.

Show question

Question

Which one of the following does not make up one of the ethical values ​​of a co-operative?

  1. Honesty 

  2. Social responsibility 

  3. Adaptability

  4. Openness

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Answer

C.

Show question

Question

What are the different types of co-operatives?


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Answer


  • Consumer co-operatives

  • Worker co-operatives

  • Producer co-operatives 

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Question

What is the difference between a public corporation and a public service?


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Answer

A public corporation is an enterprise owned by the state but offers products and services to both private and public sectors. A public service includes organizations that provide services to the entire nation. Public corporations include the BBC or Channel 4 television. Public services include the NHS or the HMRC.

Show question

Question

Which one of the following statements is correct?

  1. Non-profit organizations are all charities. 

  2. Non-profit organizations only benefit their members and donors. 

  3. Non-profit organizations do not make any profits.

  4. Non-profit organizations aim to benefit the community. 

Show answer

Answer

D.

Show question

Question

What is a municipal service?


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Answer

These are services offered by local governments and councils. Examples include libraries, street lighting, and municipal parks and recreation.

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Question

Which one of the following statements holds true for public services?

  1. Public services only serve local governments.

  2. Public services only serve national governments.

  3. Public services serve the whole nation. 

  4. Public services only serve local communities.

Show answer

Answer

C.

Show question

Question

What is PED?

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Answer

Price elasticity of demand (PED) measures how responsive demand is to a change in price. In other words, it measures the extent to which demand for a product or service changes if the price of that product or service changes.

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Question

How do you calculate PED?


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Answer

PED can be calculated by dividing the percentage change in quantity demanded by the percentage change in price.

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Question

What does it mean if the absolute value of PED is greater than one? 


Show answer

Answer

If the absolute value of PED is greater than one it means that demand is elastic.

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Question

What does it mean if the absolute value of PED is smaller than one? 


Show answer

Answer

If the absolute value of PED is smaller than one it means that demand is inelastic.

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Question

What does it mean if the absolute value of PED is equal to one?


Show answer

Answer

If the absolute value of PED is equal to one, it means that demand is unitary.

Show question

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