Income and Cross Elasticity of Demand Flashcards
1
Q
Formula for XED
A
percentage change in quantity demanded of good X / percentage change in price of good Y
2
Q
What is the XED for substitutes
A
XED greater than 0
3
Q
What is the XED for complements
A
XED less than 0
4
Q
What determines magnitude of closeness
A
How far number from 0, more = closer
5
Q
Formula for YED
A
percentage change in quantity demanded / percentage change in income
6
Q
When is a good normal (YED)
A
YED greater than 0
7
Q
When is a good inferior (YED)
A
YED less than 0
8
Q
When is a good luxury (YED)
A
YED greater than 1 (elastic)
9
Q
When is a good a necessity (YED)
A
YED less than 1 (inelastic)
