8.1 Marketing Analysis

Cambridge International A2 Level Business Studies (9609)

2026 Syllabus Objectives

By the end of this topic, you should be able to:

  1. Explain the concept of elasticity of demand: price, income and promotional
  2. Calculate price, income and promotional elasticity of demand
  3. Interpret elasticity results
  4. Explain the impact of elasticity measures on business decisions
  5. Describe the limitations of elasticity in its various forms
  6. Describe the process of product development
  7. Identify sources of new ideas for product development
  8. Explain the importance of Research and Development (R&D)
  9. Explain the need to forecast sales
  10. Use the four-period centred moving average method to forecast sales
  11. Describe qualitative sales forecasting methods
  12. Explain the impact of sales forecasting on business decisions

PART 1: ELASTICITY OF DEMAND

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What is Elasticity of Demand?

Elasticity of demand is a way of measuring how sensitive (responsive) the demand for a product is when something changes — like its price, consumers' income, or how much a business spends on advertising it.

Think of it like a rubber band. If demand is very "stretchy" (elastic), a small change in price or income causes a big change in how much people buy. If demand is "stiff" (inelastic), a change in price or income has little effect on how much people buy.

There are three types of elasticity of demand you need to know:

TypeWhat it measures
Price Elasticity of Demand (PED)How demand changes when the price changes
Income Elasticity of Demand (YED)How demand changes when consumers' income changes
Promotional Elasticity of Demand (ProED)How demand changes when the business spends more or less on advertising/promotion

Objective 1–3: Price Elasticity of Demand (PED)

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The Concept

Price Elasticity of Demand (PED) measures how much the quantity demanded of a product changes when its price goes up or down.

  • When price increases → demand usually falls
  • When price decreases → demand usually rises

PED answers the question: By how much will demand actually change?

Calculating PED

Formula:

PED=% change in quantity demanded% change in price\text{PED} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}

And the percentage change formula is:

% Change=New value−Old valueOld value×100\% \text{ Change} = \frac{\text{New value} - \text{Old value}}{\text{Old value}} \times 100

Important: PED is always a negative number because price and demand move in opposite directions — when one goes up, the other goes down.

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