Elasticities Flashcards
1
Q
What factors influence PED?
A
Availability of substitutes, necessity vs. luxury, proportion of income spent, and time period.
2
Q
What is cross-price elasticity of demand (XED)?
A
The responsiveness of demand for one good to a change in the price of another good.
2
Q
What does it mean if XED > 0?
A
The two goods are substitutes (e.g., tea and coffee).
