Elasticities (2.2)

Question 1

PeD

Answer 1

% change in quantity demanded
___________________________
% change in price

Number correspondence:
0-1; inelastic
greater than 1; elastic

Question 2

YeD

Answer 2

% change in quantity demanded
___________________________
% change in income

Question 3

XeD

Answer 3

% change in quantity demanded of good A
___________________________
% change in price of good B

Positive xeD = substitute goods
Negative XeD = complementary goods

Question 4

Ped impacting revenue

Answer 4

E - elastic
O - opposite
I - inelastic
S - same

Elastic: if price goes up, revenue falls and vice versa

Inelastic: If price goes up, so does revenue and vice versa

Question 5

Impacts on PeD

Answer 5

S - substitutes, more subs=less price elastic
P - % of income, higher %=more price elastic
L - luxury/necessity, luxury=elastic & necessity=inelastic
A - addictive, addictive=inelastic
T- time period, short run=inelastic