Elasticity

• What is PED? How to calculate PED?

  Price elasticity of demand - Responsiveness of QD to a proportionate change in income.

  
  

  Percentage change in quantity demanded divided by percentage change in price.
• What is YED? How to calculate YED?

  Income elasticity of demand - YED is the responsiveness of QD to a proportionate change in income.

  
  

  Percentage change in QD divided by percentage change in income.
• What is PES? How to calculate PES?

  Price elasticity of supply - PES is responsiveness of QS to a proportionate change in price.

  
  

  Percentage change in quantity supplied divided by percentage change in price.
• What is XED? How to calculate XED?

  Cross-price elasticity of demand - Responsiveness of QD of good A to a change in price of good B.

  
  

  It is calculated by taking the percentage change in quantity demanded of one good and dividing it by the percentage change in the price of another good.
• 1. If cross price elasticity of demand is positive, what type of relationship do the goods have?
  2. If cross price elasticity of demand is negative, what type of relationship do the goods have?

  1.Positive = substitute

  2.Negative = Complimentary goods
• 1. If income elasticity of demand is 1+ what type of good is this?
  2. If income elasticity of demand is between 0 - 1, what type of good is this?
  3. If income elasticity of demand is less than 0, what type of good is this?

  1.A luxury good

  2.A necessity

  3.An inferior good
• 1. If price elasticity of demand is 0, what type of elasticity is this?
  2. If price elasticity of demand is between 0 - 1, what type of elasticity is this?
  3. If price elasticity of demand is 1, what type of elasticity is this?
  4. If price elasticity of demand is above 1, what type of elasticity is this?
  5. If price elasticity of demand is infinite, what type of elasticity is this?

  Perfectly price inelastic

  Price inelastic

  Unitary elasticity

  Price elastic

  Perfectly price elastic