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Chapter 5 ­ Elasticity


Price Elasticity of Demand
How much demand changes when there is a change in price.

% Change in Quantiy Demanded
% Change in Price



Factors that affect PEoD:
Number of Substitutes
o When high amount of substitutes, it is likely that the demand curve will be…

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Chapter 5 ­ Elasticity




Price Elasticity and the Incidence of Taxes
If market forces aren't working then the government could intervene through taxes or subsidies.

The incidence of tax is the proportion of the tax which is passed onto consumers.

Discussing the effects of taxes can be split into 4…

Page 3

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Chapter 5 ­ Elasticity


Cross Price Elasticity of Demand
How much demand changes for `good B' when there is a change in price of `good A'.

% Change in Quantiy Demanded of Good B
% Change in Price of Good A




Substitutes have a positive XEoD; as prices fall of…

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