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Chào các em! Today we'll explore Price Elasticity of Demand (PED). It measures how sensitive the quantity demanded of a good is to changes in its price. This concept is crucial in economics and business decision-making.

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The formula for PED is: (% Change in Quantity Demanded) / (% Change in Price). Remember, we always take the absolute value of this result.

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PED values help us understand demand sensitivity:
- PED > 1: Elastic demand
- PED < 1: Inelastic demand
- PED = 1: Unit elastic
- PED = 0: Perfectly inelastic
- PED = ∞: Perfectly elastic

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Saigon Phở, a popular restaurant in Ho Chi Minh City, wants to understand how price changes affect the demand for their signature dish. They've collected data on price changes and corresponding changes in quantity demanded.

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The price of a bowl of phở increases from 50,000 VND to 55,000 VND, and the quantity demanded decreases from 1000 bowls to 900 bowls per day. Calculate the PED.

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Using your result from Question 1, is the demand for phở elastic or inelastic? What does this mean for Saigon Phở's pricing strategy?

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Given the PED you calculated, if Saigon Phở increases their prices, what will happen to their total revenue? Explain your reasoning.

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Hanoi Coffee Co., a chain of coffee shops in Hanoi, wants to analyze the PED for their Vietnamese iced coffee (cà phê sữa đá).

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The price of cà phê sữa đá increases from 30,000 VND to 33,000 VND, and daily sales decrease from 500 to 450 cups. Calculate the percentage change in price and quantity demanded.

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Using your answers from Question 4, calculate the PED for cà phê sữa đá.

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Compare the PED of cà phê sữa đá to the PED of phở from the previous scenario. Which product has a more elastic demand? Why do you think this is the case?

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A bánh mì vendor in Hội An wants to understand how price changes affect the demand for his sandwiches.

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The vendor raises the price of bánh mì from 20,000 VND to 22,000 VND. In the short term, daily sales drop from 200 to 180. In the long term, sales further decrease to 160. Calculate the PED for both short-term and long-term scenarios.

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Based on your calculations in Question 7, how does time affect the elasticity of demand for bánh mì? Explain why this might be the case.

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When the price of bánh mì increases, the demand for instant noodles at a nearby store increases by 5%. Calculate the cross-price elasticity of demand between bánh mì and instant noodles. What does this tell us about these two goods?

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Discuss at least three factors that might affect the PED of a product. How might these factors apply to the Vietnamese products we've discussed (phở, cà phê sữa đá, bánh mì)?

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How can understanding PED help Vietnamese businesses make better pricing decisions? Provide an example using one of the scenarios we've discussed.

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Think about a product you regularly purchase. Do you think its demand is elastic or inelastic? Explain your reasoning and how this might influence the pricing strategy of the business selling the product.

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Question 1:

PED=-10%/10%​=−1

Question 2:

Saigon Phở can consider maintaining or slightly adjusting prices without significant losses in quantity demanded. A price increase may not drastically reduce revenue since the decrease in quantity demanded is proportionate to the increase in price.

Question 3:

In summary, if Saigon Phở increases their prices, total revenue will remain relatively unchanged due to the unit elastic nature of demand. This allows them to adjust prices without significantly impacting their overall income from sales.

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(900-1000):100X100 = -10

(55-50):100X100= 10

=> PED = -1

Inelastics => may want to increase the price to increase the revenue => more potential profit

Increase since they are inelastic of demand so the change in price will higher than the change in demand. Also PED is -1 therefore it is profit maximisation if Saigon Pho increase the price. therefore it can improve the revenue the most