Elasticity

Question 1

Price elasticity of demand

Answer 1

Change in qty demanded/change in price

Inelastic= between 0 and 1, ignoring the minus sign

Perfectly innelastic=0

Elastic is greater than 1

Perfectly elastic= infinity

Unitary elastic is exactly 1

Question 2

INCOME elasticity of demand (YED)

Answer 2

Percentage change In qty demanded/ percentage change in price

Elastic= greater than +1

Income inelastic demand= 0- +1
Increase in income leads to smaller increase I. Demand

Negative income elasticity= less than 0
Increase in income leads to a decrease in demand

Question 3

Cross elasticity of demand (XED)

Answer 3

Percentage change in QTY of product A/ percentage change in price of product B

Positive value states that goods A and B are substitutes

Rise in price of good B leads to an increase in demand for good A

Negative value states that A and B are compliments

Rise In price of good B leads to fall in demand for good A

Question 4

Price elasticity of supply (PES)

Answer 4

Percentage change in quantity supplied/percentage change in price

Inelastic- 0-(+)1

Elastic- greater than (+)1

Unitary elastic supply=(+)1

Question 5

Percentage change

Answer 5

(Change divided by original value) X 100