# Price Elasticity, Income Elasticity And Cross Elasticity Of Demand

Economics notes

# 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.

➡️ Price elasticity of demand can be used to determine the optimal price for a good or service.

➡️ Income elasticity of demand can be used to determine the impact of changes in income on the demand for a good or service.

### What is price elasticity of demand?

Price elasticity of demand is a measure of how sensitive the demand for a good or service is to changes in its price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the price elasticity of demand is greater than one, then the demand is said to be elastic; if it is less than one, then the demand is said to be inelastic.

### What is income elasticity of demand?

Income elasticity of demand is a measure of how sensitive the demand for a good or service is to changes in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income. If the income elasticity of demand is greater than one, then the demand is said to be income elastic; if it is less than one, then the demand is said to be income inelastic.

### What is cross elasticity of demand?

Cross elasticity of demand is a measure of how sensitive the demand for one good or service is to changes in the price of another good or service. It is calculated by dividing the percentage change in quantity demanded of one good or service by the percentage change in price of another good or service. If the cross elasticity of demand is greater than one, then the demand is said to be cross elastic; if it is less than one, then the demand is said to be cross inelastic.