Other Elasticities
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8 Terms
Income Elasticity of Demand
Measures how the quantity demanded of a good responds to a change in income.
Income Elasticity Coefficient Positive
Indicates that the good is a normal good.
Income Elasticity Coefficient Negative
Indicates that the good is an inferior good.
Cross-Price Elasticity of Demand
Measures how the quantity demanded of one good responds to a change in the price of another good.
Cross Elasticity Coefficient Positive
Indicates that the two items are substitutes for each other.
Cross Elasticity Coefficient Negative
Indicates that the two items are complements to each other.
Calculation of Income Elasticity of Demand
Income elasticity of demand = percent change in quantity / percent change in income.
Calculation of Cross-Price Elasticity of Demand
Cross elasticity of demand = percent change in quantity of 1st item / percent change in price of 2nd item.
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