- Economics 9
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14/10/15 Income Elasticity of Demand (YED)
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9 Terms
Define Income Elasticity of Demand (YED)
The responsiveness of quantity demanded to a change in income.
What is the formula for Income Elasticity of Demand
% change in quantity demanded / % change in income
What is the symbol for Income
Y
Define Cross Elasticity of Demand (XED)
The responsiveness of quantity demanded of one good to a change in price of another good.
What is the formula for Cross Elasticity of Demand (XED)
% change in quantity demanded of Good B / % change in price of Good A
Explain the two possibilities of an XED being negative
As the price of Good A rises, quantity demanded of Good B falls.
As the price of Good A falls, quantity demanded of Good B increases.
What does a negative XED tell you about the goods
They are complementary goods
Explain the two possibilities of an XED being positive
As the price of Good A rises, quantity demanded of Good B increases.
As the price of Good A falls, quantity demanded of Good B decreases.
What does a positive XED tell you about the goods
They are substitute goods.