EconomicsCode 9708
Price elasticity, income elasticity and cross elasticity of demand
What this topic asks you to be able to do
- the meaning given to price elasticity, income elasticity and cross elasticity of demand (PED, YED, XED)
- how to work out price elasticity, income elasticity and cross elasticity of demand, and the formulae used for each
- why relative percentage changes matter, and what the coefficient's size and sign tell us, for each of: price elasticity of demand; income elasticity of demand; cross elasticity of demand
- the categories into which an elasticity figure can fall: perfectly elastic, (highly) elastic, unitary elasticity, (highly) inelastic, perfectly inelastic
- how price elasticity of demand differs from one point to another along a straight-line demand curve
- what influences the value of each of these: price elasticity of demand; income elasticity of demand; cross elasticity of demand
- the link connecting price elasticity of demand with total spending on a good
- the consequences that price elasticity, income elasticity and cross elasticity of demand have for making decisions