Chapter 4: Elasticity of demand and supply

Question 1

What are the factors affecting PED

Answer 1

Habit of consumers
Proportion of Income spent on the good
Degree of Necessity
Time period
No. And closeness of Substitutes

Question 2

Define YED

Answer 2

It measures the responsiveness of demand of a good due to a change in consumer’s income, ceteris paribus.

Question 3

Define XED

Answer 3

It measures the responsiveness of demand of a good due to a change in the price of another related good, ceteris paribus.