1.2 Elasticity

Price elasticity of demand (PED)

PED formula

PED value

Range of PED values

The effects of PED on revenue

PED values and consumer response

Determinants of PED

The number and closelessness of substitutes

The necessity of the product and how widely it is defined

Time period considered

PED on a demand curve

Why does PED vary along a straight line?

Role of PED for firm decision making regarding price changes and their effect on total revenue

PED for primary commodities vs. PED for manufactured products

PED and government policies (Taxation)

Cross price elasticity of demand

XED formula

XED values (Complementary goods vs. Close substitutes)

Why does the absolute value of XED depend on the closeness of the relationship between two goods?

What are the implications of XED for business if prices of complements/substitutes change?

Income elasticity of Demand (YED)

YED equation

YED values
-Normal goods (positive)
-Inferior goods (negative)

Necessity goods vs. luxury goods

YED implications for producers and the economy

Price elasticity of Supply (PES)

PED equation

PES values

Determinants of PES

Time period

Factor mobility

Number of firms

Stocks and Spare Capacity

Length of Production Period

PES of primary commodities vs. manufactured products