Elasticities of supply and demand
– 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:
3. Income Elasticity of Demand for:
– 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:
– Cross elasticity for substitutes is +ve
– Cross elasticity for complements is -ve