Elasticities of Demand Flashcards
1
Q
What does Price Elasticity of demand (PED) measure?
A
Measures the responsiveness of quantity demanded to a change in price.
2
Q
What does Income Elasticity of demand (YED) measure?
A
Measures the responsiveness of quantity demanded to a change in consumer income.
3
Q
What does Cross Elasticity of Demand (XED) measure?
A
Measures the responsiveness of quantity demanded for one good to a change in the price of another good.
4
Q
Formula for PED
A
PED= %change in QD/ %change in P
5
Q
Formula for YED
A
YED= %change in QD/ %change in income
6
Q
Formula for XED
A
XED= %change in QD of good A / %change in price of good B
7
Q
PED>1
A
relatively elastic
8
Q
PED=1
A
unitary elastic
9
Q
PED<1
A
relatively inelastic
10
Q
PED=0
A
perfectly inelastic
11
Q
YED<0
A
inferior goods
12
Q
YED<1
A
normal goods
13
Q
YED>1
A
Luxury goods
