Formulae For And Calculation Of Price Elasticity, Income Elasticity And Cross Elasticity Of Demand
Economics notes
Formulae For And Calculation Of Price Elasticity, Income Elasticity And Cross Elasticity Of Demand
➡️ Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
➡️ Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.
➡️ Cross elasticity of demand measures the responsiveness of quantity demanded of one good to a change in the price of another good. It is calculated by dividing the percentage change in quantity demanded of one good by the percentage change in price of the other good.
➡️ Inelastic demand occurs when the price elasticity of demand is less than one, meaning that a change in price has a smaller effect on quantity demanded than the change in price.
➡️ Elastic demand occurs when the price elasticity of demand is greater than one, meaning that a change in price has a larger effect on quantity demanded than the change in price.
What is price elasticity of demand and how is it calculated?
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. The formula for price elasticity of demand is
Price elasticity of demand = (% change in quantity demanded) / (% change in price)
What is income elasticity of demand and how is it calculated?
Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income. The formula for income elasticity of demand is
Income elasticity of demand = (% change in quantity demanded) / (% change in income)
What is cross elasticity of demand and how is it calculated?
Cross elasticity of demand measures the responsiveness of quantity demanded of one good to a change in the price of another good. It is calculated by dividing the percentage change in quantity demanded of one good by the percentage change in price of another good. The formula for cross elasticity of demand is
Cross elasticity of demand = (% change in quantity demanded of good A) / (% change in price of good B)