Price rises, demand increases

Classified in Economy

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Elasticity of demand is a measure of how much the demand for a product changes when there is a change in one of the factors

PED
Elasticity of demand is how much the quantity demanded for a good chages when There is a change in the price of the good.

PED=Percentage change in QD/
          Percentage change in P

DETERMINANTS OF PED
-The number and closeness of substitutes
-The necessity of the product and how widely the product is defined
-Time period considered

XED
Cross elasticity of demand is a measure of how much the demand for a product Changes when there is a change in the prize of another product

XED=%change in the QD product A
         %change in the P of product B
If xed is positive the two goods are substitutes
If xed is negative the the two products are compliments

YED
Income elasticity of demand is a measure of how much the demand for a product Changes when there is a change in the consumer’s income.

YED=%change in QD of product
          %change in income
For normal goods, the YED is positive
For inferior goods, the YED is negative

PES
Price elasticity of supply is a measure of how much the supply of a product Changes when there is a change in the price of a product

PES=% change in QS of product
         % change in P of product

PES=0; change in P will have no effect on QS
PED=infinity; QS will go forever but if prize drops QS will go to 0

Determinants

-How much costs rise as outputs increased
-Time period considered, more time more elastic
-Ability to store stock

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