LS15 - XED and YED

Question 1

What is the formula for XED?

Answer 1

% change in QD for product A /// % change in price of product B

Question 2

What is the cross price elasticity of demand (XED) ?

Answer 2

Cross price elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good

Question 3

What does it mean if XED is positive?

Answer 3

Substitute goods

Question 4

What does it mean if XED is negative?

Answer 4

Complement goods

Question 5

What does it mean if XED is equal to zero?

Answer 5

Unrelated goods

Question 6

What is the formula for YED?

Answer 6

% change in QD /// % change in income

Question 7

What is YED?

Answer 7

Income elasticity of demand (YED) measures the responsiveness of demand given changes in income

Question 8

What does it mean if YED is negative?

Answer 8

Inferior goods
When income rises, demand falls

Question 9

What does it mean if YED is positive?

Answer 9

Normal goods
When income rises, demand rises

Question 10

What does it mean if YED is between 0 and 1?

Answer 10

The good is classes as income inelastic goods. These tend to be necessities

Question 11

What does it mean if YED is greater than 1?

Answer 11

The good is classed as income elastic goods. These tend to be luxuries