Other elasticities of supply and demand, Microeconomics

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Elasticities of supply and demand

  1. Other Demand Elasticities

          – Income elasticity of demand calculates the percentage change in quantity demanded resulting from a percent change              in income.

      2. The income elasticity of demand is:

1713_elasticity of demand and suppy.png

      3. Income Elasticity of Demand for: 

925_elasticity of demand and suppy1.png

– Superior goods 

– Normal goods 

– Inferior goods

      4. Other Demand Elasticities

– Cross elasticity of demand calculates the percentage variation in the quantity demanded of one good that comes out from a percent change in the price of the other good.

– For instance take the alternate goods, butter and margarine.

      5. The cross elasticity of demand is:

 

2456_elasticity of demand and suppy2.png

– Cross elasticity for substitutes is +ve

– Cross elasticity for complements is  -ve


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