what is data analysis
it transforms raw data into helpful info that can be used to analyse business situations
name 3 methods of data analysis
pie charts
histograms
index numbers
index numbers
they help to understand the significance of the change
easier to interpret larger numbers
we always compare with a base number
they show percentage changes compared with base numbers
moving averages
shows whether a trend is significant by smoothing out fluctuations in data
allows for better identification of an overall trend
how to calculate moving averages
if sales over 3 month are 100, 200, 130
(100+200+130) /3 =143.333 116.7
advantages of moving averages
quick and easy
easier to understand data
good for small and seasonal businesses
trends are clearer
disadvantages of moving averages
data is lost at the edges since you can’t calculate the first or last digit
what does price elasticity of demand show to a business
values from price elasticity of demand calculations can give a business an indication of how sensitive or elastic it’s products are to change in price
price elasticity of demand PED values
0 or less- demand is perfectly inelastic, won’t change at all when price changes, demand curve will be vertical
between 0 and 1- the % change in demand from the first to second level of demand is smaller than percentage change in price demand is inelastic
1- % change in demand is same as % change in price, demand is unit elastic
1 or more- very sensitive to price of the product, demand is elastic
factors impacting price elasticity of demand on revenue
number of close substitutes, the more there is the more elastic demand is bcs customers can switch to others which could reduce rev
cost of switching between products- if there’s costs involved demand is more likely to be inelastic making rev easier to maintain
whether it’s a luxury or necessity- necessities tend to have an inelastic demand
a business manufacturing products that are price elastic can try cutting its costs and lowering prices to maintain revenue, they can also try to make prices more inelastic using branding or marketing
what can income elasticity of demand be used for by business
to judge how it would be affected by economic change
income elasticity formula
% change in quantity demanded
——————————
% change in income
interpreting income elasticity of demand YED
normal goods have a positive income elasticity of demand, as consumer income rises more is demanded at each price level, product is income elastic
normal necessities have a positive YED of between 0 and +1 demand is rising less than proportionately to a change in income
luxury goods and services have a positive YED of more than +1 demand rises more than proportionately to change in income
inferior goods have a neg YED, demand falls as incomes rise
factors impacting income elasticity of demand on rev
a recession- during a recession incomes will fall so consumers will become more price sensitive, for inferior goods demand will rise, for normal goods demand will reduce since less income
taxation- if the rate of income tax increases demand will fall for norms, luxury and normal necessities, inferior goods will have more demand as incomes fall
what could a business do if a product is sensitive to price
focus the product on higher income consumers as they’re less sensitive to changes
cut costs rather than raising prices
attempt to make products more income inelastic
