Economics Micro - Elasticity 0.0 / 5 ? EconomicsElasticityA2/A-levelNone Created by: EmmaL88Created on: 05-01-20 17:19 What does Price Elasticity of Demand measure? The responsiveness of demand to changes in price 1 of 24 What does Income Elasticity of Demand measure? The responsiveness of demand to changes in income 2 of 24 What does Cross Price Elasticity of Demand measure? The responsiveness of one good when the price of another good changes 3 of 24 Is PED always positive or negative? and Why? Negative, because Price and Demand have a negative correlation 4 of 24 What are the determinants of PED? Number of Substitute goods, Time, luxury/necessity, Percentage of income spent 5 of 24 What is the formula for PED? Proportionate change in Quantity Demanded/ Proportionate change in Price Change in Qd/Q X Price/Change in Price 6 of 24 If the PED is perfectly elastic what does the line on a graph look like? Horizontal 7 of 24 If the PED is perfectly inelastic what does the line on a graph look like? Vertical 8 of 24 If the PED is elastic what does the line on a graph look like? Shallow downwards sloping 9 of 24 If the PED is inelastic what does the line on a graph look like? Steep downwards sloping 10 of 24 If the PED is unit elastic what does the line on a graph look like? L curve shape, Inversely proportional 11 of 24 What is the formula for Income elasticity of Demand? Proportionate change in Quantity Demanded/ Proportionate change in Income Change in Qd/Q X Income/Change in Income 12 of 24 If YED is negative, what does this mean? (type of good) Inferior good 13 of 24 If YED is positive, what does this mean? (type of good) Normal good 14 of 24 If YED is between -1 and +1 what does this mean? Necessity 15 of 24 If YED is greater than +1 what does this mean? Luxury good 16 of 24 What is the formula for XED? Proportionate change in Quantity Demanded a/ Proportionate change in Price b Change in Qda/Qa X Pb/Change in Pb 17 of 24 If XED is negative, what does this mean? (type of good) Complementary 18 of 24 If XED is positive, what does this mean? (type of good) Substitute 19 of 24 If XED is between -1 and -infinty what does this mean? It is elastic (close complementary) 20 of 24 If XED is between 0 and -1 what does this mean? It is inelastic (weak complementary) 21 of 24 If XED is between 0 and +1 what does this mean? It is inelastic (weak substitute) 22 of 24 If XED is between +1 and +infinty what does this mean? It is elastic (good substitute) 23 of 24 If XED is 0 what does this mean? Perfectly inelastic (unrelated good, unresponisve complementary) 24 of 24
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