Elasticity

Question 1

Factors that determine price elasticity of supply

Answer 1

Ease of storage
Length of production
Spare capacity
Number of producers

Question 2

Factors that determine price elasticity of demand

Answer 2

Amount of substitutes
Essential or non essential nature of good
Income level
Price

Question 3

Factors that determine income elasticity of demand

Answer 3

Income levels
Proportion of income spent on said good or service
Degree of essential of the good

Question 4

Types of income elasticity goods

Answer 4

Inferior- income decreasing increases demand

Normal - demand increases as income increases

Luxury- high end products at which demand increases faster than income

Question 5

Formulas for all elasticity

Answer 5

^= change ALL IN PERCENTAGE CHANGES

PED=^ QD/ ^ P
PED=^ QS/ ^ P
YED= ^ QD/ ^ Y

Question 6

XED Formula

Answer 6

% change of Q demanded for good A / % change in price of good B

Question 7

Elasticity (E)

Answer 7

Pros
Useful in sales forecasting
How much to produce - productive efficiency, X efficiency