5.4

Question 1

What is the formula for Income Elasticity of Demand?

Answer 1

Income Elasticity of Demand = % change in quantity demanded ÷ % change in income.

Question 2

What is the formula for Cross-Price Elasticity of Demand?

Answer 2

Cross-Price Elasticity of Demand = % change in quantity of good A ÷ % change in price of good B.

Question 3

What type of cross-price elasticity do substitutes have?

Answer 3

Substitutes: Positive cross-price elasticity.

Question 4

What type of cross-price elasticity do complements have?

Answer 4

Complements: Negative cross-price elasticity.

Question 5

What is the formula for Wage Elasticity of Labor Supply?

Answer 5

Wage Elasticity of Labor Supply = % change in labor supplied ÷ % change in wages.

Question 6

What is the formula for Wage Elasticity of Labor Demand?

Answer 6

Wage Elasticity of Labor Demand = % change in labor demanded ÷ % change in wages.

Question 7

What does Savings Elasticity measure?

Answer 7

Savings Elasticity: Response of savings to interest rate changes.

Question 8

What does Borrowing Elasticity measure?

Answer 8

Borrowing Elasticity: Response of borrowing to interest rate changes.