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Economics help notes for students
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Uploaded on 04/11/2025
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Economics Notes: Elasticity
1. Price Elasticity of Demand (PED) Measures responsiveness of quantity demanded to a change in price. Formula : % change in QD / % change in Price Elastic (PED > 1): responsive to price changes. Inelastic (PED < 1): not very responsive. 2. Determinants of PED Availability of substitutes Necessity vs. luxury Time period Proportion of income spent on the good 3. Price Elasticity of Supply (PES) Measures responsiveness of quantity supplied to a change in price. Formula : % change in QS / % change in Price Elastic (PES > 1) vs. Inelastic (PES < 1) 4. Determinants of PES Time period Spare capacity Stock levels Flexibility of production 5. Income Elasticity of Demand (YED) Measures how demand changes with income. Formula : % change in QD / % change in Income Normal goods : YED > 0 Inferior goods : YED < 0
6. Cross Elasticity of Demand (XED) Measures responsiveness of demand for one good to a change in price of another. Formula : % change in QD of Good A / % change in Price of Good B Substitutes : XED > 0 Complements : XED < 0 End of Notes