Elasticities (PED, YED, PES)

Elasticity

A measure of the responsiveness of one economic variable to a change in another economic variable. Elasticity is always expressed as a ratio of percentage changes. The more responsive the variable, the more elastic it is. Used by economists, firms and governments to make predictions about the effects of price and income changes.

Price Elasticity of Demand (PED)

Measures the responsiveness of quantity demanded to a change in the good's own price, ceteris paribus. FORMULA: PED = (% change in Qd) ÷ (% change in Price). PED is always negative (Law of Demand — price and Qd move in opposite directions) but the absolute value |PED| is used for interpretation. EXAMPLE: Price rises 10%, Qd falls 20% → PED = −20% ÷ 10% = −2.

PED — Calculation Method (Step by Step)

Step 1: % change in Qd = (New Qd − Old Qd) ÷ Old Qd × 100. Step 2: % change in Price = (New P − Old P) ÷ Old P × 100. Step 3: PED = (% change in Qd) ÷ (% change in Price). Always keep the negative sign in your answer. EXAMPLE: Price rises from €10 to €12. Qd falls from 200 to 160. % change in Qd = (160−200)/200 × 100 = −20%. % change in P = (12−10)/10 × 100 = +20%. PED = −20% ÷ 20% = −1.

PED — Elastic Demand (|PED| > 1)

Quantity demanded is relatively responsive to a price change — the % change in Qd is GREATER than the % change in price. |PED| > 1. The demand curve is relatively flat. EXAMPLE: A 10% rise in the price of a specific brand of cereal causes a 25% fall in Qd → |PED| = 2.5 → elastic. If price rises, total revenue FALLS. If price falls, total revenue RISES.

PED — Inelastic Demand (|PED| < 1)

Quantity demanded is relatively unresponsive to a price change — the % change in Qd is SMALLER than the % change in price. |PED| < 1. The demand curve is relatively steep. EXAMPLE: A 10% rise in petrol price causes only a 3% fall in Qd → |PED| = 0.3 → inelastic. If price rises, total revenue RISES. If price falls, total revenue FALLS.

PED — Unit Elastic (|PED| = 1)

The % change in Qd exactly equals the % change in price. |PED| = 1. A rise in price leaves total revenue UNCHANGED. The demand curve is a rectangular hyperbola (every point on the curve gives the same TR = P × Q). EXAMPLE: Price rises 15%, Qd falls 15% → |PED| = 1.

PED — Perfectly Inelastic (|PED| = 0)

Quantity demanded does not change at all when price changes. |PED| = 0. Demand curve is VERTICAL. Theoretical extreme — approximated by life-saving medication with no substitute. EXAMPLE: Insulin for Type 1 diabetics — patients must have it regardless of price. Price can rise dramatically with no fall in Qd.

PED — Perfectly Elastic (|PED| = ∞)

Consumers will buy any quantity at the going price but nothing above it — an infinitely small price rise causes Qd to fall to zero. |PED| = ∞. Demand curve is HORIZONTAL. EXAMPLE: A single wheat farmer in a perfectly competitive market faces a perfectly elastic demand curve — they are a price taker. Consumers switch entirely to other sellers if price rises even slightly.

DIAGRAM — Five PED Values

Draw five separate demand curves: (1) Vertical line = perfectly inelastic (PED=0). (2) Steep downward slope = inelastic (0 < |PED| < 1). (3) Diagonal line with slope −1 = unit elastic (|PED|=1). (4) Flat downward slope = elastic (|PED|>1). (5) Horizontal line = perfectly elastic (PED=∞). Label each with its PED value. Show a price rise ΔP on each — the flatter the curve, the greater the fall in Qd.

DIAGRAM — Elastic vs Inelastic Demand

Draw two diagrams side by side. Left: relatively flat demand curve D (elastic, |PED|>1). Right: relatively steep demand curve D (inelastic, |PED|<1). On each: show the same price rise from P1 to P2. On elastic: large fall in Qd (Qd1 to Qd2 is a big gap). On inelastic: small fall in Qd (small gap). This visually demonstrates the difference in responsiveness.

Determinants of PED — Number and Closeness of Substitutes

The most important determinant. The more substitutes a good has, and the closer they are, the MORE elastic demand is — consumers can easily switch if price rises. EXAMPLE: A specific brand of cola (many close substitutes) has more elastic demand than cola in general. Petrol has few close substitutes → inelastic demand.

Determinants of PED — Necessity vs Luxury

Necessities (food, medicine, electricity) tend to have INELASTIC demand — consumers must buy them regardless of price. Luxuries (designer handbags, foreign holidays) tend to have ELASTIC demand — consumers can easily forgo them if price rises. EXAMPLE: |PED| for bread ≈ 0.1–0.3 (inelastic necessity); |PED| for restaurant meals ≈ 1.5–2.5 (elastic luxury).

Determinants of PED — Proportion of Income

The higher the proportion of income spent on a good, the MORE elastic demand tends to be — consumers pay more attention to price changes for expensive items. EXAMPLE: A rise in the price of a car (large proportion of income) causes a bigger % fall in Qd than a rise in the price of a box of matches (tiny proportion of income).

Determinants of PED — Time Period

Demand becomes MORE elastic over time as consumers find alternatives and adjust habits. In the short run, demand is more inelastic (consumers are locked into habits/contracts). In the long run, demand is more elastic. EXAMPLE: A rise in petrol prices has limited short-run effect on Qd (people still commute). Over time, consumers buy more fuel-efficient cars or move closer to work → Qd falls more → demand becomes more elastic.

Determinants of PED — Habit-Forming and Addictive Goods

Goods that are habit-forming or addictive have MORE INELASTIC demand because consumers find it difficult to reduce consumption even when prices rise. EXAMPLE: Cigarettes, alcohol, coffee — consumers continue purchasing despite price rises. This is why governments can raise significant tax revenue by taxing these goods (and why tobacco companies can raise prices without large falls in sales).

Determinants of PED — Breadth of Market Definition

The more NARROWLY a market is defined, the MORE elastic demand is. The more broadly defined, the less elastic. EXAMPLE: Demand for "Nespresso Original pods" (narrow) is more elastic than demand for "hot drinks" (broad) — there are many more substitutes for one specific brand than for hot drinks in general.

PED and Total Revenue — The Key Relationship

Total Revenue (TR) = Price (P) × Quantity (Q). The effect of a price change on TR depends on PED: ELASTIC demand (|PED|>1): price rise → TR falls; price cut → TR rises. INELASTIC demand (|PED|<1): price rise → TR rises; price cut → TR falls. UNIT ELASTIC (|PED|=1): price change → TR unchanged. RULE: Price and TR move in OPPOSITE directions when elastic; SAME direction when inelastic.

DIAGRAM — PED and Total Revenue

Draw a demand curve. At price P1 and quantity Q1: shade the TR rectangle (area = P1 × Q1). Now lower price to P2 — quantity rises to Q2. Shade new TR rectangle (P2 × Q2). If new rectangle is LARGER → demand is elastic (price cut increased TR). If SMALLER → inelastic (price cut reduced TR). If same area → unit elastic. This diagram is essential for questions on pricing strategy and tax incidence.

PED Calculation — Worked Example 1

Price of cinema tickets rises from €8 to €10 (25% rise). Monthly attendance falls from 400 to 320 (20% fall). PED = −20% ÷ 25% = −0.8. |PED| = 0.8 → inelastic demand. Interpretation: a 1% rise in price causes only a 0.8% fall in quantity demanded. Old TR = €8 × 400 = €3,200. New TR = €10 × 320 = €3,200. TR unchanged? Actually: check — PED is not exactly −1. Let me recalculate: −20/25 = −0.8 → inelastic → TR should rise. New TR €3,200 vs old €3,200 — this example shows near-unit elastic behaviour.

PED Calculation — Worked Example 2

Price of designer handbags rises from €200 to €250 (25% rise). Qd falls from 1,000 to 600 (40% fall). PED = −40% ÷ 25% = −1.6. |PED| = 1.6 → elastic demand. Interpretation: a 1% rise in price causes a 1.6% fall in Qd. Old TR = €200 × 1,000 = €200,000. New TR = €250 × 600 = €150,000. TR FELL by €50,000 — consistent with elastic demand (price rise reduces TR when |PED|>1).

Applications of PED — Firm Pricing Strategy

Firms use PED to maximise revenue. If demand for their product is INELASTIC (few substitutes, necessity, strong brand loyalty): raising price increases TR — firms should charge higher prices. EXAMPLE: Pharmaceutical companies price essential medicines very high. If demand is ELASTIC: lowering price increases TR and market share — firms compete on price. EXAMPLE: Budget airlines use low prices to attract price-sensitive customers.

Applications of PED — Government Taxation

Governments prefer to tax goods with INELASTIC demand to raise revenue efficiently — a large tax causes only a small fall in Qd, so tax revenue is high. EXAMPLE: Excise taxes on cigarettes, alcohol and petrol are effective revenue raisers because demand is inelastic. Additionally: taxing demerit goods (cigarettes, alcohol) with inelastic demand also pursues health objectives — even if Qd doesn't fall much, government still raises revenue to fund healthcare.

Applications of PED — Tax Burden (Incidence)

Who bears the burden of an indirect tax depends on PED (and PES). If demand is INELASTIC: consumers bear most of the tax burden (price rises significantly, Qd falls little). If demand is ELASTIC: producers bear more of the burden (they cannot raise prices much without losing sales — they absorb more of the tax). DIAGRAM: Show supply shifting left by amount of tax. With inelastic D: large price rise, small Qd fall — most tax burden on consumers. With elastic D: small price rise, large Qd fall — more burden on producers.

Real World Example — PED (Petrol)

Petrol has inelastic demand in the short run (|PED| ≈ 0.1–0.3). During the 2022 energy crisis, petrol prices in Europe roughly doubled — yet consumption fell by much less than 50% because consumers had few immediate alternatives (still needed to commute, heat homes). Governments across Europe raised petrol taxes for decades precisely because of this inelastic demand — guaranteeing stable tax revenues. In the long run, demand becomes more elastic as consumers switch to EVs or public transport.

Real World Example — PED (Luxury Goods)

LVMH (Louis Vuitton, Dior, Moët Hennessy) regularly raises prices on its luxury goods — and demand either stays stable or increases. This seems to contradict the Law of Demand. Explanation: (1) Veblen effect — for some luxury goods, a higher price INCREASES demand because it signals exclusivity and status. (2) Very loyal high-income customers with highly inelastic demand. (3) Strong branding eliminates substitutes → |PED| is very low. LVMH's strategy of raising prices to increase revenue is consistent with inelastic demand theory.

Income Elasticity of Demand (YED)

Measures the responsiveness of quantity demanded to a change in consumer income, ceteris paribus. FORMULA: YED = (% change in Qd) ÷ (% change in income). Positive YED = normal good (demand rises with income). Negative YED = inferior good (demand falls as income rises). The magnitude indicates how responsive demand is to income changes.

YED — Calculation Method

Step 1: % change in Qd = (New Qd − Old Qd) ÷ Old Qd × 100. Step 2: % change in income = (New income − Old income) ÷ Old income × 100. Step 3: YED = % change in Qd ÷ % change in income. EXAMPLE: Income rises from €30,000 to €33,000 (10% rise). Demand for restaurant meals rises from 4 to 6 per month (50% rise). YED = 50% ÷ 10% = +5 → income elastic normal good (luxury).

YED — Income Elastic Normal Good (YED > +1)

Demand rises proportionally MORE than income. YED > +1. Typical of luxury goods — holidays, fine dining, designer clothing, sports cars. As incomes grow, spending on these rises faster than income. IMPLICATION: These industries grow rapidly during economic booms but contract sharply during recessions. EXAMPLE: A 10% rise in income causes a 20% rise in demand for foreign holidays → YED = +2.

YED — Income Inelastic Normal Good (0 < YED < +1)

Demand rises but proportionally LESS than income. 0 < YED < +1. Typical of necessities — basic food, clothing, utilities, public transport. EXAMPLE: A 10% rise in income causes only a 3% rise in demand for bread → YED = +0.3 → income inelastic normal good. These industries are relatively stable across the business cycle.

YED — Inferior Good (YED < 0)

Demand FALLS as income rises. YED is negative. As consumers become wealthier, they switch to higher-quality alternatives. EXAMPLE: A 10% rise in income causes a 5% FALL in demand for bus travel → YED = −0.5 → inferior good. Other examples: instant noodles, own-brand supermarket products, second-hand clothing.

YED — Zero Income Elasticity (YED = 0)

Demand does not change at all when income changes. Purely theoretical — approximated by very basic necessities like salt. Demand is completely unresponsive to income changes.

Distinguishing Normal from Inferior Goods Using YED

SIGN of YED determines the type: Positive YED (+) = normal good (demand rises with income). Negative YED (−) = inferior good (demand falls as income rises). MAGNITUDE of YED determines sensitivity: YED > +1 = income elastic (luxury). 0 < YED < +1 = income inelastic (necessity). |YED| > 1 (negative) = strongly inferior.

YED Calculation — Worked Example

National income rises by 8%. Demand for new cars rises by 16%. YED = 16% ÷ 8% = +2. Interpretation: cars are a normal, income elastic (luxury) good. A 1% rise in income causes a 2% rise in car demand. IMPLICATION for car firms: demand is highly sensitive to the business cycle — in a recession (income falls 5%), expect car demand to fall approximately 10%.

Applications of YED — Business Cycle Planning

YED helps firms and governments forecast how demand changes during booms and recessions. HIGH positive YED (luxury goods): boom → large demand surge; recession → sharp demand fall. LOW positive YED (necessities): relatively stable demand throughout the cycle. NEGATIVE YED (inferior goods): demand rises in recessions. EXAMPLE: During the 2008–09 global recession, demand for luxury cars (high YED) collapsed; demand for budget supermarkets like Aldi and Lidl (negative/low YED products) increased.

Applications of YED — Sectoral Shift (Engel's Law)

Ernst Engel (19th century statistician) observed that as income rises, the proportion of income spent on food falls — even though absolute spending on food rises. This is because food has a low positive YED (income inelastic). As economies grow richer, the share of agriculture in GDP falls and the share of services (high YED) rises. This explains the structural shift from agriculture → manufacturing → services as countries develop.

Applications of YED — Developing vs Developed Economies

In developing economies: a large share of income is spent on necessities (food, basic clothing) with low YED. As incomes grow, spending rapidly shifts toward manufactured goods and services with higher YED. This pattern of demand transformation is central to the theory of economic development. EXAMPLE: Rising Chinese middle-class incomes (2000s–2020s) caused explosive demand growth for cars, electronics, travel — all high YED goods.

Price Elasticity of Supply (PES)

Measures the responsiveness of quantity supplied to a change in the good's own price, ceteris paribus. FORMULA: PES = (% change in Qs) ÷ (% change in Price). PES is always POSITIVE (Law of Supply — price and Qs move in the same direction). EXAMPLE: Price rises 10%, Qs rises 20% → PES = +20% ÷ 10% = +2 → elastic supply.

PES — Calculation Method

Step 1: % change in Qs = (New Qs − Old Qs) ÷ Old Qs × 100. Step 2: % change in Price = (New P − Old P) ÷ Old P × 100. Step 3: PES = % change in Qs ÷ % change in Price. Always positive. EXAMPLE: Price of copper rises from $6,000 to $6,600/tonne (10%). Qs rises from 1,000 to 1,080 tonnes (8%). PES = 8% ÷ 10% = +0.8 → inelastic supply.

PES — Elastic Supply (PES > 1)

Quantity supplied is relatively responsive to a price change — % change in Qs is GREATER than % change in price. PES > 1. Supply curve is relatively flat. EXAMPLE: A manufacturer with spare production capacity can quickly increase output when price rises → elastic supply. Firms can respond to price signals rapidly.

PES — Inelastic Supply (PES < 1)

Quantity supplied is relatively unresponsive to a price change — % change in Qs is SMALLER than % change in price. PES < 1. Supply curve is relatively steep. EXAMPLE: Agricultural crops (take a full season to grow), handmade artisan goods, houses in urban areas — supply cannot be quickly expanded even when price rises.

PES — Unit Elastic (PES = 1)

% change in Qs exactly equals % change in price. PES = 1. Represented graphically by any straight-line supply curve passing through the ORIGIN — at every point on such a curve, PES = 1. This is a mathematical property worth memorising for diagram questions.

PES — Perfectly Inelastic (PES = 0)

Quantity supplied cannot change regardless of how much price rises. PES = 0. Supply curve is VERTICAL. EXAMPLE: Original Picasso paintings — only a fixed number exist; their supply cannot increase at any price. Also: land in a city centre in the very short run. The supply of seats at a sold-out stadium on the night of a concert.

PES — Perfectly Elastic (PES = ∞)

Producers will supply any quantity at the going price — if price falls even slightly, Qs falls to zero. PES = ∞. Supply curve is HORIZONTAL. EXAMPLE: A perfectly competitive firm in the long run can supply any quantity at the long-run equilibrium price. Any good with constant returns to scale and unlimited input availability approximates this.

DIAGRAM — Five PES Values

Draw five supply curves on separate diagrams: (1) Vertical = perfectly inelastic (PES=0). (2) Steep upward slope = inelastic (0 < PES < 1). (3) Straight line through origin = unit elastic (PES=1). (4) Flat upward slope = elastic (PES>1). (5) Horizontal = perfectly elastic (PES=∞). Show the same price rise ΔP on each — the flatter the curve, the greater the rise in Qs.

DIAGRAM — PES = 1 (Line Through Origin)

Any straight-line supply curve that passes through the origin has PES = 1 at every point — regardless of its slope. Proof: % change in Qs ÷ % change in P. On a line through origin, Qs/P is constant → ratio of % changes = 1. This is a key diagram fact: do NOT assume a steep supply curve is inelastic just because it is steep — if it passes through the origin, PES = 1.

Determinants of PES — Time Period

The most important determinant. Supply is MORE elastic over time as firms can adjust all inputs. IMMEDIATE RUN (market period): supply is perfectly inelastic — output is fixed (PES=0). SHORT RUN: some inputs can be varied (e.g. labour hours, raw materials) → supply is more elastic. LONG RUN: all inputs can be varied, new firms can enter, new capacity can be built → supply is most elastic. EXAMPLE: House supply is perfectly inelastic immediately after a price rise. Over years of construction: becomes more elastic.

Determinants of PES — Availability of Stocks and Inventories

If firms hold large stocks of finished goods, they can increase supply quickly by releasing stocks without expanding production → MORE elastic supply. If stocks are low or the good is perishable (cannot be stored): supply is LESS elastic. EXAMPLE: A supermarket with large warehouses can increase supply of tinned goods quickly (elastic). A fresh fish supplier cannot store supply → inelastic.

Determinants of PES — Spare Production Capacity

If firms have idle machinery, empty factory space, or underemployed workers, they can expand output quickly in response to a price rise → MORE elastic supply. If firms are already at full capacity, expanding output requires building new facilities → time-consuming → LESS elastic supply. EXAMPLE: A factory running at 60% capacity can increase output quickly (elastic). A factory at 100% capacity cannot without investment.

Determinants of PES — Factor Mobility

If factors of production (labour and capital) can be easily moved into this industry from other uses → MORE elastic supply. If factors are specialised or immobile → LESS elastic supply. EXAMPLE: General labour can switch industries relatively easily → more elastic. Highly specialised oil rig workers cannot easily be replaced or redeployed → less elastic supply of oil.

Determinants of PES — Complexity and Length of Production Process

The longer and more complex the production process, the LESS elastic supply is — firms cannot respond quickly to price signals. EXAMPLE: Building a nuclear power plant takes 10–15 years → PES for nuclear electricity ≈ 0 in the short/medium run. Growing a vineyard takes years → wine supply is very inelastic. Mass-produced consumer electronics have shorter production cycles → more elastic.

Determinants of PES — Nature of the Industry

Primary industries (agriculture, mining, fishing) tend to have INELASTIC supply — constrained by natural cycles, geography, and long time lags. Secondary industries (manufacturing) tend to have MORE ELASTIC supply — production can often be scaled up using existing technology and capital. Service industries vary — a hairdresser can add appointment slots quickly (elastic); a surgeon cannot be trained quickly (inelastic).

PES Calculation — Worked Example 1

Price of wheat rises from €200 to €220 per tonne (10% rise). Quantity supplied rises from 5,000 to 5,200 tonnes (4% rise). PES = 4% ÷ 10% = +0.4 → inelastic supply. Interpretation: a 1% rise in price causes only a 0.4% rise in quantity supplied. Typical of agricultural goods — supply cannot be quickly expanded within a growing season.

PES Calculation — Worked Example 2

Price of smartphone cases rises from €10 to €15 (50% rise). Quantity supplied rises from 10,000 to 16,000 units (60% rise). PES = 60% ÷ 50% = +1.2 → elastic supply. Interpretation: supply is responsive — manufacturers can ramp up production quickly using existing machinery and materials. Typical of simple manufactured goods.

Applications of PES — Price Volatility in Agricultural Markets

Agricultural supply is highly inelastic in the short run (PES ≈ 0 within a growing season). This means even small shifts in demand cause LARGE price swings — price volatility is a defining feature of agricultural markets. EXAMPLE: A poor harvest (supply shifts left) causes a large price spike — supply cannot be quickly restored. This is a key justification for government agricultural price stabilisation policies (buffer stocks, guaranteed prices).

Applications of PES — Housing Market

Urban housing supply is very inelastic due to: land scarcity, lengthy planning and construction processes, high capital requirements. PES for housing ≈ 0.1–0.3 in the short run. This means rising demand (e.g. from population growth or immigration) causes large price rises rather than large increases in supply. EXAMPLE: Vienna, London, and Dublin all face housing affordability crises partly because supply is too inelastic to respond to rising demand. Policy responses: planning reform, social housing construction, rent controls (though rent controls reduce supply further).

Applications of PES — Tax Incidence

The burden of an indirect tax is shared between consumers and producers based on BOTH PED and PES. If supply is INELASTIC (steep supply curve): producers bear more of the tax burden — they cannot reduce Qs much, so they absorb more of the tax rather than passing it on through higher prices. If supply is ELASTIC: producers can more easily reduce Qs and pass more of the tax to consumers through higher prices. DIAGRAM: Show supply shifting left. With inelastic S: small price rise, producers bear most of tax. With elastic S: large price rise, consumers bear most.

Tax Incidence — Full Analysis

Tax incidence depends on BOTH PED and PES jointly: Consumers pay more when demand is INELASTIC (|PED| low) AND/OR supply is ELASTIC (PES high). Producers pay more when demand is ELASTIC (|PED| high) AND/OR supply is INELASTIC (PES low). GENERAL RULE: The less elastic side of the market bears more of the tax burden. This is why taxes on petrol (inelastic demand) are largely borne by consumers; taxes on industries with many competitors (elastic supply) are also largely passed to consumers.

DIAGRAM — Tax Incidence with Elastic vs Inelastic Demand

Draw two diagrams with the same supply shift (tax). LEFT diagram: inelastic demand curve (steep). Tax shifts S left by amount of tax. New equilibrium: large rise in P (consumers pay much more), small fall in Q. Consumer tax burden = large. RIGHT diagram: elastic demand curve (flat). Same supply shift. New equilibrium: small rise in P, large fall in Q. Consumer tax burden = small, producer burden = large. The steeper the demand curve relative to supply, the more consumers pay.

Elasticity — Summary Table

PED: Formula = %ΔQd ÷ %ΔP. Sign = always negative. Elastic if |PED|>1. Inelastic if |PED|

Relationship Between Elasticities and Government Policy

PED informs: which goods to tax for maximum revenue (inelastic goods) and how much of the tax consumers vs producers will bear. YED informs: which industries will grow/shrink with economic growth and during business cycles. PES informs: how quickly markets adjust to demand shocks and how tax burdens are shared between producers and consumers. All three elasticities are essential tools for evaluating the effectiveness and consequences of government intervention — central to HL Paper 3 calculations.

Real World Example — PES (Semiconductor Shortage 2020–2022)

The global semiconductor shortage (2020–2022) illustrated extremely inelastic supply. Building a new chip fabrication plant costs $10–20 billion and takes 2–3 years. When demand surged (pandemic-driven demand for electronics + supply chain disruption), supply could not respond → PES ≈ 0 in the short run → prices surged and shortages lasted years. Car manufacturers halted production lines despite willing buyers. In the long run (2024–2025), new fabs came online → supply became more elastic. This illustrates how PES determines the duration and severity of supply shocks.

Real World Example — YED (Lidl and Aldi During Recessions)

During the 2008–09 global financial crisis and the 2022–23 cost of living crisis, German discount supermarkets Lidl and Aldi saw significant increases in market share across Europe as consumers traded down from premium brands. This reflects: (1) Premium branded goods have positive YED — as real incomes fell, demand fell. (2) Own-brand/discount goods have low or negative YED — demand rose as real incomes fell. Aldi and Lidl expanded rapidly in the UK, Ireland, and Austria precisely because their product mix is income inelastic or inferior.