Ch8 PED, XED, YED

Front

What is elastic demand?

Back

Where the relative change in the quantity demanded is greater than the change in price, income, or the prices of substitutes and complements.

Front

What is inelastic demand?

Back

Where the relative change in the quantity demanded is less than the change in price, income, or the prices of substitutes and complements.

Front

What is Price Elasticity of Demand (PED)?

Back

A numerical measure of the responsiveness of the quantity demanded to a change in price of the product.

Front

How is PED calculated?

Back

PED = % change in quantity demanded / % change in price.

Front

What factors affect the price elasticity of demand?

Back

1. Availability and attractiveness of substitutes. 2. Relative expense of the product. 3. Time period.

Front

What is Income Elasticity of Demand (YED)?

Back

A numerical measure of the responsiveness of the quantity demanded to a change in income.

Front

How is YED calculated?

Back

YED = % change in quantity demanded / % change in income.

Front

What is income elastic demand?

Back

When the percentage change in quantity demanded is greater than the percentage change in income.

Front

What is income inelastic demand?

Back

When the percentage change in quantity demanded is less than the percentage change in income.

Front

What is a normal good?

Back

The quantity demanded increases as income increases.