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Elasticity
How responsive is the quantity … to a change in …
Elasticity of demand
is how responsive is the quantity demanded to a change in price
PED formula
% change in the quantity demanded for good X / % change in the price of good X
%change formula
((new value - old value) / old value) x 100
Factors affecting PED
Substitutes
Proportion of income spent
Luxury or necessity
Addictiveness
Time
Total revenue rule
in order to maximise revenue, firms should increase the price of products that are price inelastic in demand and decrease prices on product that are elastic in demand
Income elasticity of demand (YED)
how responsive is a change in quantity demanded to a change in income
YED
% change in quantity demanded / % change in income
Note 
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