Other Elasticities

Income Elasticity of Demand

• income elasticity of demand = percent change in quantity/percent change in income

• income elasticity coefficient positive = normal good

• income elasticity coefficient negative = inferior good

Cross-Price Elasticity of Demand

• cross elasticity of demand when comparing two items = percent change in quantity of 1st item/percent change in price of 2nd item

  • percent change in quantity of 1st item = change in price/midpoint between quantities

  • percent change in price of 2nd item = change in price of the second item/midpoint between prices

• cross elasticity coefficient positive = items substitute for each other

• cross elasticity coefficient negative = items complement each other