Econ 1 - Elasticities Flashcards
1
Q
PED equation?
A
%∆ in demand of good X/
% ∆ in Price of Good X
2
Q
PED values
A
> 1 = Elastic
3
Q
Determinants of PED
A
- price of good
- availability of substitutes
- time
4) Whether product is luxury or a necessity
4
Q
YED equation
A
% ∆ in quantity demanded /
% ∆ in income
5
Q
YED Values
A
Positive YED = Normal good
Negative YED = Inferior good
Zero YED = demand remains unchanged as income changes
6
Q
XED equation
A
% ∆ in Demand for Good A /
% ∆ in Price of Good B
7
Q
XED values
A
- Positive XED = substitute goods
- XED>1 = close substitute
- 0-1 = Close complement
- XED
8
Q
PES equation
A
% ∆ in Supply of Good X /
% ∆ in Price of Good X
9
Q
PES Values
A
PES > 1 = Elastic
PES
10
Q
Determinants of elasticity of supply
A
- Time
- stock levels
- investment
- no. of firms
- ability to alternate production methods.
