Discuss whether the price elasticity of demand for video games is elastic or inelastic

Edexcel A-Level Economics Paper 1 June 2025 Extract

With reference to the information provided, discuss whether the price elasticity of demand for video games is elastic or inelastic. (12 marks)

Paragraph 1

1. One reason why demand for video games might be price inelastic is because they can be addictive.
2. This means that for every 10% increase in price, quantity demanded would fall by less than 10%.
3. Extract B mentions that 'The high prices do not seem to deter many new buyers, especially in markets such as sports and multi-player action games.'
4. If a newer version of an addictive video game is released, consumers will still buy them despite an increase in price.
5. Firms would be aware of this; they will see an increase in total revenue when they increase prices.

Paragraph 2

1. Another reason why demand for some video games might be price inelastic is because they cost a small proportion of total income.
2. For example, Minecraft specifically costs £14.99 which means that if firms raise prices by 10%, many people would be unaffected.
3. This is since a £1.50 increase is unlikely to affect most consumers' budget.

Evaluation

1. However, there are many factors that affect the PED of a good or service and this can also vary from game to game.
2. One factor that might be important is the availability of substitutes.
3. If there are many similar games available, then that one firm might struggle to raise prices and keep the same demand, making that particular game inelastic.
4. Also, proportion of income might be a bigger factor if we consider the fact that young children might be using their pocket money to buy games.
5. Therefore, a small increase in price might deter sales as children would not be able to pay more and more for the games.

A-Level Economics Tutoring

I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.