Elasticity of demand and supply

price elasticity of demand

the responsiveness of demand to a change in price

PED formula

% change in quantity demanded / % change in price

PED>1

elastic

PED<1

inelastic

PED=1

unit elastic

PED=0

perfectly inelastic

PED= infinite

perfectly elastic

Unit elastic products

theatre tickets

Perfectly inelastic products

medication

Perfectly elastic products

hotel

Price elasticity of supply

the responsiveness of supply to a change in price

PES formula

% change in quantity supplied / % change in price

Normal good

if income rises, people demand more

Inferior good

if income rises, people demand less and switch demand to substitutes

Income elasticity of normal goods

positive

Income elasticity of inferior goods

negative

YED formula

% change in quantity demanded / % change in income

Substitute goods

if the price of a one good rises, demand increases for its substitute

Complementary goods

if the demand of one good increases, the demand of the other one increases too

XED formula

%change in Quantity Demanded of Good A / %change in Price of Good B

XED substitute goods

positive

XED of complementary goods

negative

Total revenue

Price x Quantity