Elasticity (PED/YED/XED/PES)

Question 1

What is Price Elasticity of Demand (PED)

Answer 1

Measures the responsiveness of quantity demanded to change in the good’s own price

PED = %change in demand ÷ %change in price

Question 2

Income Elasticity of Demand (YED) is what?

Answer 2

It measures the responsiveness if demand in percentage terms to a change in the real incomes of customers.

YED = %change in demand ÷ %change in income

Question 3

Cross-price Elasticity of Demand (XED) is what?

Answer 3

The responsiveness of demand for good X following changes in the price of a related good Y.

XED = %change in demand for good X ÷ %change in price for good Y

Question 4

If XED = 0 then they are what type of goods?

Answer 4

Unrelated goods

Such as orange juice and bus travel

Question 5

Price Elasticity of Supply (PES) is what?

Answer 5

The responsiveness of quantity supplied to a change in the good’s own price.

PES = %change in quantity supplied for good X ÷ %change in price for good X